LIFE  INSURANCE 


By  ABB  LANDIS 


REVIEW  of  the  Business  as  Conducted  by 
Friendly  Societies,  Fraternal  Orders,  Life  Com- 
panies, Industrial  Companies  and  Open  Assess- 
ment Associations,  and  History  of  the  Five  Kinds 
of  Organizations.  Explanations  of  Valuations. 
Methods  of  Computing  Annual  and  Single  Premiums  for  In- 
surances and  Annuities,  Application  of  Commutation  Columns, 
Formulas  for  Benefits  and  Contributions.  Compilation  of 
Reserve  Values  and  Forty  Important  Tables  of  Contributions 
and  Commutation  Columns  for  Death  and  for  Disability  and 
for  Combined  Death  and  Disability  Benefits;  and  Six  Mortal- 
ity Tables  for  Males,  for  Females,  and  for  Males  and  Females 
Constructed  on  the  Experience  of  Forty-three  Fraternal  Bene- 
ficiary Societies.  Derived  Values  from  the  National  Fraternal 
Congress  Table  of  Mortality  at  3%,  3£%  and  4%  Interest, 
and  the  American  Experience  Table  and  4%  Interest.  Com- 
parison of  Reserves  Accumulated  under  Different  Mortality 
Tables  and  Different  Forms  of  Contracts.  Illustrations  of  the 
Prospective  and  Retrospective  Methods  of  Valuation  are  given 
in  detail,  with  their  relation  to  the  Provisions  of  the  Mobile 
and  New  York  Conference  Bills,  together  with  Instructions 
for  the  Compilation  of  Statistics  for  Valuations  and  Annual 
Reports. 


PRICE,  $10.00  PER  COPY 


(Copyright,  1914,  by  Abb  Landis) 

NASHVILLE,  TENNESSEE 


BRANDON-NASHVILLE 


INTRODUCTION. 

In  response  to  an  announcement  that  I  would  revise  and  rewrite  the  five  books, 
"Friendly  Societies  and  Fraternal  Orders,"  "Insurance  Past  and  Present,"  "Life  In- 
surance Premiums,  How  Computed,  Tested  and  Valued,"  "Analyses  of  Fraternal  So- 
cieties," and  "Life  Insurance  Problems"  (all  of  which  were  out  of  print),  there  were 
received  one  hundred  and  nineteen  subscriptions  at  $10.00  per  copy  for  the  proposed 
publication.  The  actual  expenses  incident  to  the  publication  exceeded  the  total  of 
subscriptions.  To  many  who  had  copies  of  the  five  books,  $10.00  per  copy  appeared 
high  for  what  they  believed  would  be  largely  a  duplication  of  the  books  already  pur- 
chased. In  consequence,  many  who  have  always  been  purchasers  of  other  publica- 
tions are  not  numbered  amongst  the  subscribers  for  this  book.  However,  it  is  not  a 
duplication  of  previous  books,  and  I  am  responsible  for  making  a  somewhat  mislead- 
ing first  announcement.  It  was  in  mind  at  the  time  to  merely  revise  and  rewrite,  but 
1  have  reproduced  only  the  pertinent  parts  of  the  other  publications,  and  give  more 
pages  of  entirely  new  matter  than  the  total  pages  of  the  other  books,  not  including 
their  tables.  When  this  fact  becomes  known  I  hope  to  receive  additional  orders  for 
the  limited  number  of  extra  copies  over  the  subscription  edition. 

The  new  and  exclusive  tables  given  in  the  Appendix  should  be  worth  $10.00  to 
any  insurance  office,  or  to  any  consulting  actuary.  At  any  rate  I  have  tried  to  make  the 
book  worth  the  price.  To  fraternal  beneficiary  societies,  in  addition  to  the  two  score 
of  important  tables,  the  discussion  of  Readjustment,  Expenses,  Computation  of  Con- 
tribution Rates,  Valuation,  Reserves,  Actuarial  Principles  and  the  Application  of  Formu- 
las should  give  $10.00  in  value. 

Not  as  an  advertisement  but  as  a  reason  for  the  subscription  price,  I  have  made 
this  introductory  statement. 

Many  times  I  have  been  called  as  a  witness  in  court  proceedings,  antf  invariably 
the  attorneys  desired  to  impress  the  court  by  having  the  names  of  the  societies  which 
have  given  me  employment  as  an  expert.  Recently  I  was  called  upon  for  such  a 
statement,  and  in  giving  a  list  of  fraternal  beneficiary  societies  on  pages  75-79,  it 
occurred  to  me  that  it  would  be  a  mark  of  appreciation  to  indicate  by  a  star  those 
which  had  favored  me.  There  have  been  changes  in  official  management,  and  there 
have  been  changes  in  actuarial  advisers,  but  there  remains  to  me  a  lasting  advantage 
from  the  knowledge  acquired  through  personal  service  rendered  to  the  more  than 
140  organizations,  with  their  varied  plans  and  experiences. 

Nashville,  Tenn.,  March,  1914. 

A.  L. 


ERRATA 

Page    30. — L;nt  line,  Oth  paragraph,  "not"  should  be  "now." 
"       47. — Line  3,  Oth  paragraph,  "Oronhyatekha,"  not  "Oronhyatebeha." 

5X.— Line  2,  last  paragraph,  "1899,"  not  "1890." 

63. — Line  8,  "Legion,"  not  "League." 
"       77. — -Line  29,  "Slavonian,"  not  "Salvonian." 
"       78. — Line  13,  "Protective,"  not  "Protection." 
"       93  and  94. — -Last  and  first  paragraphs  should  be  leaded. 
"       94. — Line  6,  "and,"  not  "an." 
"      119. — Line  16,  "low,"  not  "lower." 
"      192-3-6. — Should  be  general  headings. 
"     204. — Line  3  from  bottom,  "S,"  not  "R." 
"     205.— Line  7,  "€20,"  not  "c  0." 
"     207. — Next  to  last  line,  insert  "of  1"  after  "contract." 

«  208.— Twelfth  formula,  last  term  should  be,  "  1 2  ( N  "  -  N  "  +  n  ) . " 

"  210. — Third  line  from  bottom,  "s"  in  "month's"  out  of  alignment. 

"  211.— Last  formula,  "1000Px  =  1000Mx-J-(Nx+eMx-(Rx+1-Rx+1+e;t)." 

"  211. — Line  9  from  bottom,  "insured,"  not  "insuranced." 

"  215. — 'Line  10,  for  "Another,"  write  "A  quite." 

"  216.— Line  10  should  be  "ax-ax+1." 

"  210. — In  table,  heading  should  be  "No.  1  Continued." 

"  216. — In  table,  lines  39  and  40,  "a:2— a->i"  should  be  "a*-'— a  23." 

"  217. — Line  4th  from  end  of  paragraph  1,  should  be  "69,"  not  "79." 

"  220. — Line  8,  strike  out  comma  after  "death." 

"  224. — Line  10,  "following"  should  be  "preceding." 

"  232. — Line  12,  "insurance,"  not  "insurants." 

"  234.— Lines  7,  8,  14  and  26,  should  be  "iV»,"  not  "iV35." 

"     234.— Third  formula  should  be  "P38  x'— -  — s=P«Xu35-k35=,V36." 

P35  P35 

"  235. — -Line  18  should  be  comma,  not  semicolon,  after  "protection." 

"  240.— Line  12,  "the,"  not  "he." 

"  241. — Line  6,  should  be  "amount,"  not  "number." 

"  245.— Line  32,  should  be  "  27.82,"  not    50.58." 

"  263. — Line  15,  after  "gives"  insert  "the  summation  of." 

"  265. — Line    9,  "heirs,"  not  "heir." 

"  267.— Line  18,  "I"  instead  of  the  editorial  "\ve." 

"  271. — Line  8th  from  bottom,  "bow-wows,"  not  "bow-bows." 

"  283.— Line  17,  change  "three"  to  "two"  and  "four"  to  "three." 

291.— Line  20,  "the,"  not  "these." 

"  299. — -Line  25,  "an,"  not  "as." 

"     301.— Line  36,  "Ajy,"  not  "A.'y." 

"  304  and  5.— Heading  "1000qxv,"  not  "1000qxv*." 

"  342.— "log.  i5a"  should  be  ".81023,"  not  ".91023." 

"  343. — "In  heading  and  bottom  page  d*  should  be  dx. 

"  354.— Table  XXXIII,  "i*"  should  be  "ix." 

"     358. — Add  for  reference  pages  at  "Group  Insurance 98-9. 

"     359. — Add  for  reference  pages  "Mortuary  Accretions 200-1 . 

"     364. — In  proper  place  insert: 

"Maternity  Benefits 300-1 . 

"Benefits  for  Member's  Wife -  .301-2.' 

"General  Comnents_.  3i)2-3.' 


ORIGIN  OF  FRIENDLY  SOCIETIES. 

Associations  of  the  nature  of  Friendly  Societies  existed  two  or  three  centuries 
before  the  Christian  Era.  In  ancient  Greece  they  were  called  Thiases  and  sometimes 
Evanes.  Thiases  is  derived  from  Thiaso,  which  means  to  lead  a  chorus  or  dance. 
Evanes  is  derived  from  Evanos,  which  signifies  a  contribution,  or  a  collection,  especially 
for  a  feast.  It  also  means  money,  in  the  same  sense  as  evanizomai,  meaning  "I  beg  an 
alms" — or  collect,  or  get  together  alms.  The  societies  were  formed  for  the  purpose 
of  celebrating  festivals  in  common  to  some  divinity,  and  the  members  being  so  asso- 
ciated in  pleasure  (and  semi-religious  worship)  fell  into  such  close  relations  and  good 
fellowship  that  it  followed  inevitably  from  the  promptings  of  human  nature  that  they 
should  render  assistance  to  those  who  might  be  reduced  to  want  through  sickness. 
Collective  pride  and  brotherly  feeling  led  to  the  custom  of  providing  suitable  funerals 
for  deceased  members.  Thus  grew  up  private  corporations  (recognized  by  the  State), 
which  had  their  laws,  officers,  degrees,  contributions  and  benefactions,  and  their  regu- 
lar meeting  places.  They  were,  in  ancient  times,  numerous  in  many  important  cities. 
At  Rhodes  there  were  the  "Companions  of  the  Sun,"  "The  Sons  of  Bacchus,"  of 
"Minerva,"  of  "Jupiter  Atabyrius,"  of  "Jupiter  the  Savior."  At  Athens,  the  "Hero- 
ists,"  the  "Oregons,"  and  the  "Thiasotes." 

A  society  organized  for  the  worship  of  "Diana  and  Antinous,"  according  to  an  in- 
scription found  19  miles  from  Rome,  at  Lanuvium,  made  regular  collections  from 
members  for  the  expenses  of  feasts  and  festivities  and  for  the  funerals  of  deceased 
members.  In  case  of  death  there  were  allowed  for  funeral  expenses  300  sesterces 
(about  $11.00).  The  entrance  fee  was  an  amphora  of  good  wine  and  100  sesterceb 
($3-75)  and  the  monthly  dues  of  five  asses  (about  four  cents). 

Most  friendly  societies  are  of  modern  origin.  There  is  really  no  direct  connection 
between  them  and  the  "Gilds,"  much  less  the  more  ancient  orders.  Association  of 
individuals  at  public  houses,  or  in  the  same  kind  of  work,  or  otherwise,  brought  about 
good  fellowship  and  personal  regard,  and  produced  the  effort  to  assist  one  another. 
Human  nature  has  been  the  same  for  ages  and,  whenever  subjected  to  similar  con- 
ditions, similar  results  follow.  Thus  have  been  formed  the  Friendly  Societies  of 
England  and  the  Fraternal  Beneficiary  Societies  of  America. 

The  Friendly  Societies  of  Great  Britain  had  their  real  beginning  with  the  Act  of 
1/93,  and  the  present  organizations  are  the  direct  "outgrowth  of  the  institutions  which 
accepted  the  benefits  of  registration  under  that  Act.  The  Fraternal  Beneficiary  Orders 
in  the  United  States  had  their  real  origin  in  the  starting  of  the  Ancient  Order  of 
United  Workmen,  by  Father  Upchurch,  in  1868.  Unfortunately,  he  was  wholly  igno- 
rant of  what  had  been  accomplished  in  Great  Britain  and  failed  to  profit  by  seventy 
years  of  available  experience  along  the  lines  upon  which  he  was  starting  his  great 
work.  Other  fraternal  orders  followed  the  A.  O.  U.  W.  in  rapid  succession,  but  none 
of  them  took  advantage  of  similar  experiments  across  the  Atlantic.  It  will  be  seen, 
therefore,  that  the  fraternal  orders  of  America,  while  operating  upon  independent 
lines,  have  in  effect  repeated  the  history  of  the  Friendly  Societies  in  respect  of  promises 
to,  and  payments  by,  their  members — especially  have  the  errors  and  mistakes  in  rela- 
tion to  benefits  and  contributions  been  reproduced  in  the  conduct  and  management  of 


-.2 

,"•:**>  i  L.5."  *.- 

fraternal  orders.     Had  lessons  been  learned  from  the  Friendly  Societies  these  mis- 
takes and  errors  could  have  been  avoided. 

Mr.  George  F.  Hardy,  Fellow  of  the  Institute  of  Actuaries,  and  one  of  the  most 
noted  and  prominent  of  English  mathematicians,  wrote  a  prize  essay  upon  the  Friendly 
Societies  in  1887,  and  gave  the  following  succinct: 


HISTORICAL  SKETCH. 

In  considering  the  origin  and  development  of  the  friendly  society  system,  it  is 
necessary  to  recognize  the  twofold  purpose  that  these  institutions  have  fulfilled.  In 
the  view  of  the  actuary  they  are  merely  associations  for  the  mutual  assurance  of  certain 
benefits,  generally  in  the  case  of  sickness  or  death  of  any  of  the  members.  This,  how- 
ever, represents  only  one  side,  and  that  by  far  the  most  recent,  of  the  work  of  these 
institutions.  A  not  less  prominent  and  much  older  feature  is  to  be  found  in  the  pppor 
tunities  for  social  intercourse,  companionship  and  mutual  help,  which  such  associations 
naturally  afford — wants  common  to  man  in  every  state  of  society,  and  as  old  as  civili- 
zation itself.  Hence,  from  the  earliest  times,  small  communities  have  existed,  drawn 
together  by  the  common  interests,  tastes  or  pursuits  of  the  members,  such  communi- 
ties being  originally  purely  social  in  character,  subsequently  charitable  and  mutually 
protective,  and  only  in  recent  times  financial. 

Prior  to  the  thirteenth  century,  aid  was  generally  dispensed  to  the  necessitous 
by  the  church.  Being  the  central  and  only  receiver  of  contributions  for  this  pur- 
pose, and  the  sole  dispenser  of  relief,  its  charitable  functions  covered  the  same  kind 
of  wants  that  our  friendly  societies  deal  with  at  the  present  time.  These  functions 
were  to  feed  and  clothe  the  destitute,  to  visit  the  sick,  to  house  the  homeless,  to 
liberate  prisoners,  and  to  bury  the  dead — in  its  own  words,  vito,  poto,  cibo,  redimo, 
tego,  colligo,  condo. 

In  the  thirteenth  and  fourteenth  centuries  a  great  social  change  took  place.  Agri- 
cultural serfdom  was  gradually  breaking  up,  industries  began  to  develop  and  a  general 
tendency  was  manifested  by  society  to  forsake  the  socialistic  order  of  things.  As 
regards  the  relief  of  the  poor,  the  first  effect  of  the  change  was  the  taking  over  of 
part  of  the  functions'  hitherto  performed  by  the  church  by  smaller  communities  of 
persons,  each  community,  or  guild,  as  they  were  called,  having  a  more  or  less  dis- 
tinct and  well-defined  object. 

The  following  paragraph  in  the  statutes  of  the  Guild  of  Smiths  of  Chesterfield  is 
of  great  interest:  "When  a  brother  is  ill  and  needs  relief,  then  he  shall  receive  half 
a  dime  daily;  when  brethren  fall  into  poverty,  then  they  shall  go  singly,  on  certain 
days,  into  the  houses  of  their  brethren,  where  each  one  shall  be  received  civilly,  and 
he  shall  obtain  whatsoever  he  may  need  in  the  shape  of  food  and  clothing,  as  if 
he  were  the  master  of  the  house  himself;  and  he  shall  also  receive  half  a  dime,  like 
those  who  are  ill,  and  then  he  shall  go  his  way  in  peace."  It  is  to  these  guilds  that 
we  must  look,  rather  than  the  protective,  trade  guilds,  which  then  existed,  for  the 
progenitors  of  our  modern  friendly  societies. 

The  period  of  the  Reformation  was  another  era  of  change  in  the  direction  of  self- 
assertion  and  self-help,  and  the  general  tendency  affected  the  guilds  quite  as  much, 
perhaps,  as  the  change  from  Catholicism  to  Protestantism.  In  the  fifteenth  century 
they  began  to  decay.  Corruption  and  abuses  were  not  uncommon  amongst  them,  as 
in  the  convents  and  other  religious  foundations.  This  state  of  things  culminated  n 
the  sixteenth  century  in  the  passing  of  Acts  27,  31,  and  37  of  Henry  VIII,  and  i  of 
Edward  VI,  which  enabled  the  king  to  confiscate  the  property  of  both  guilds  and 
monasteries. 

In  the  sixteenth  and  seventeenth  centuries  some  of  these  institutions  which  .had 
survived  the  preceding  period,  and  still  retained  sufficient  cohesion,  were  reformed, 
whilst  many  new  societies  were  started,  embodying  some  of  the  features  of  the  guilds 
but  in  conformity  with  more  modern  ideas. 

The  relief  and  economic  system  of  these  societies,  moreover,  underwent  a  radical 
change  in  the  direction  of  requiring  fixed  contributions  to  be  made  by  the  members 
for  the  grant  of  specific  benefits.  As  an  illustration  of  the  financial  basis  of  such 
societies,  it  may  be  interesting  to  note  that  in  one  society  the  subscriptions  were  2d. 
weekly,  to  provide  for  benefits  during  sickness,  of  6s.  weekly  for  the  first  year,  and 


3 

3S.  6d.  per  week  for  the  remainder  of  illness,  while  a  levy  of  6d.  per  member  was 
made  at  each  death. 

About  the  beginning  of  the  eighteenth  century  a  movement  arose  in  the  Guild  of 
Masons  which  exercised  a  great  influence  in  stimulating  the  rapid  growth  of  friendly 
societies.  By  the  introduction  of  mystic  rites  and  observances,  and  by  other  changes, 
which  need  not  be  detailed  here,  the  Guild  of  the  craft  of  masonry  was  transformed 
into  the  Order  of  Freemasons. 

The  friendly  societies  existing  at  the  close  of  the  eighteenth  century  appear  to  have 
been  very  similar  in  the  nature  of  their  operations  to  those  of  the  present  day.  It  is 
difficult  to  estimate,  with  any  degree  of  certainty,  the  number  of  societies  or  their 
aggregate  membership,  but  there  is  good  reason  for  believing  that  they  were  at  least 
as  numerous  in  proportion  to  population  as  at  the  present  day.  Sir  P.  Colquhoun, 
in  1796,  estimated  the  number  of  societies  in  London  at  600,  with  a  membership  of 
70,000,  while  Sir  F.  M.  Eden,  five  years  later,  considered  that  the  whole  kingdom 
might  number  7,200  societies,  with  a  membership  of  over  600,000.  The  amount  of  the 
sick  pay  allowed  seems  somewhat  larger  in  proportion  to  wages  than  now,  6s.,  8s., 
and  los.  a  week  being  common  sums ;  while  the  modern  system,  now  all  but  universal, 
of  reducing  the  sickness  allowance  in  cases  of  prolonged  illness,  appears  to  have  been 
at  this  date,  rare,  although,  in  some  cases,  the  allowance  ceased  after  a  specified  period 
of  13,  20,  or  26  weeks  of  illness,  and  in  others  provision  was  made  for  the  super- 
annuation of  members  at  a  reduced  rate  of  pay. 

It  was  very  usual  for  societies  at  this  period  to  limit  their  membership — 101,  81, 
and  in  some  cases  51  or  41  members,  was  made  the  limit  of  a  society;  though  what 
superstition  lay  in  the  use  of  these  numbers  it  is  impossible  to  say. 

The  rules  of  the  societies,  as  in  earlier  times,  almost  always  exercised  a  paternal 
care  over  the  morals  and  even  the  opinions  of  the  members. 

The  friendly  society  system,  on  the  whole,  worked  well,  but  it  had  many  defects 
which  became  increasingly  apparent.  The  societies  having  no  legal  status  were  open 
to  fraud  and  corrupt  practices,  no  prosecution  being  possible  except  in  the  names  of 
all  the  members,  the  societies  being  regarded  at  law  as  partnerships.  The  uniform 
premiums  did  not  answer  well;  as  members  grew  old,  younger  men  did  not  care  to 
join,  and  bankruptcy  often  resulted.  There  was  also  too  much  feasting  by  members 
ar  the  expense  of  the  funds. 

Mr.  Hardy  might  have  added  to  his  last  sentence  the  statement  that  "feasting" 
became  such  a  feature,  about  the  close  of  the  eighteenth  century,  as  to  give  the  so- 
cieties the  name  of  "Free  and  Easies."  There  was  a  reaction  against  the  dissipation 
characteristic  of  these  clubs,  and  a  marble  mason,  named  Bolton,  who  had  gone  to 
Manchester  from  London  in  1809,  began  an  agitation  for  reformed  methods,  and,  in 
1812,  succeeded  in  organizing  an  improved  Order  of  Odd  Fellows'  Club,  or  Lodge. 
His  scheme  was  to  abandon  the  "free  and  easy"  proceedings  and  make  an  effective 
provident  institution,  adapted  to  the  wants  of  artisans  whose  occupations  called  them 
into  various  parts  of  the  kingdom.  Probably  from  this  idea  came  the  word  "Inde- 
pendent," introduced  into  the  name  of  his  organization — as  the '"Lodges"  at  different 
places  were  to  be  independent  of  each  other;  while  the  "Manchester  Unity"  conveyed 
the  other  idea  of  .general  centralization  in  supervision  and  co-operation.  The  "Man- 
chester Unity — Independent  Order  of  Odd  Fellows,"  was  the  pioneer  of  modern 
Friendly  Societies,  and  today  leads  all  others  in  the  world  in  number  of  members 
and  financial  strength.  Because  of  its  age,  its  size,  its  success,  its  mortality  and  sick- 
ness experience,  its  errors  and  reforms,  and  its  most  comprehensive  conduct  in  opera- 
tion, the  history  of  the  Manchester  Unity  will  cover  all  of  the  ground  necessary  to 
be  turned,  in  order  to  reap  the  benefits  from  a  study  of  past  action  and  present 
prosperity  of  Friendly  Societies. 

LEGISLATION. 

An  important  factor  in  the  development  of  Friendly  Societies  was  the  several  Acts 
of  Parliament  from  1793  to  the  last  general  law  of  1896.  As  before  stated,  the  pro- 


ceedings  at  the  periodical  meetings  had  so  degenerated  into  excessive  festivities  that 
provision  against  sickness  and  death  had  become  jeopardized. 

In  1787  Gilbert  originated  the  idea  of  requiring  each  society  to  be  registered  in 
order  to  obtain  legal  protection;  and  it  was  his  proposals  undoubtedly  which  induced 
the  framing  and  passing  of  the  highly  important  Act  of  1793,  which  practically  settled 
the  struggle  between  compulsion  and  voluntaryism  in  favor  of  the  latter  system. 

The  Act  of  1793  marked  a  new  era  in  the  history  of  Friendly  Societies.  Their 
legal  position  before  the  Act,  and  the  various  abuses  that  resulted  from  it,  have 
already  been  referred  to.  The  Act  remedied  abuses  by  establishing  some  supervision 
and  some  safeguards  as  to  the  management.  It  required,  for  example,  the  sub- 
mission of  rules,  and  alteration  of  rules,  to  the  justices  at  Quarter  Sessions,  who 
had  power  to  confirm  them  or  not  at  discretion.  The  objects  of  the,  society  were 
to  be  specified,  and  a  dissolution  could  only  take  place  with  the  consent  of  the 
justices. 

On  the  2ist  of  June,  1793,  this  first  of  the  Friendly  Societies  Acts  was  passed, 
and  it  was  commonly  known  as  Sir  George  Rose's  Act,  the  33  Geo.  Ill,  c.  54. 

It  is  not  easy  to  systematize  the  various  efforts  made  by  the  Legislature  to  con- 
trol or  to  encourage,  as  the  case  might  be,  the  Friendly  Society  movement  between 
1793  and  the  great  Act  of  1875.  All  of  these  attempts  were  necessarily  of  the 
nature  of  experiments,  and  were  generally  without  any  common  plan. 

In  1818  a  bill  was  introduced  providing  for  the  appointment  of  five  public 
valuers — in  the  language  of  the  bill,  "persons  skilled  in  arithmetical  calculations" 
— to  whom  tables  and  rules  might  be  submitted  at  fixed  fees.  The  fear  of 
government  interference,  however,  which  was  so  common  among  members  of 
Friendly  Societies,  caused  this  provision  to  be  struck  out  of  the  Act  of  the  fol- 
lowing year  (1819).  This  Act,  however,  provided  that  rules  and  tables  of  all 
future  societies  should  both  be  confirmed  by  the  justices  at  Quarter  Sessions;  and, 
moreover,  contained  the  important  provision  that  such  justices  should  not  confirm 
or  allow  any  table  of  payments  or  benefits,  or  any  rules  dependent  upon  or  con- 
nected with  the  calculations  thereof,  until  it  shall  have  been  made  to  appear  to 
such  justices  that  the  said  tables  and  rules  are  such  as  have  been  approved  of 
by  two  persons  at  least,  known  to  be  professional  actuaries  or  persons  skilled  in 
calculation,  as  fit  and  proper  according  to  the  most  correct  calculation  of  which 
the  nature  of  the  case  will  admit.  In  the  same  way,  dissolution  could  only  take  place 
with  the  consent  of  the  trustees  and  under  the  certificate  of  two  actuaries. 

The  Act  of  1829  contained  several  provisions  of  considerable  importance.  By  this 
Act,  nearly  all  previous  legislation  relating  to  Friendly  Societies  was  repealed,  arid 
the  law  consolidated.  The  Act  allowed  any  number  of  persons  to  form  a  society  and 
to  make  rules,  provided  that  these  latter  should  declare  the  purpose  of  the  society, 
and  that  they  should  be  submitted  to  a  barrister  or  to  the  Lord  Advocate  for 
certification. 

Perhaps  the  most  important  provision  in  the  Act,  however,  was  that  requiring 
quinquennial  returns  of  sickness  and  mortality  to  be  made  to  the  clerk  of  the 
peace,  by  whom  they  were  to  be  transmitted  to  the  Secretary  of  State  and  laid 
before  Parliament ;  all  societies  neglecting  to  make  such  returns  losing  the  priv- 
ileges of  the  Act.  The  object  was  stated  clearly  in  the  Act  to  be  the  collection  of 
data  by  which  tables  of  the  payments  and  allowances  dependent  on  the  duration 
of  sickness  and  probability  of  human  life  may  be  constructed,  "the  present  existing 
data  of  these  subjects  having  been  found  imperfect  and  insufficient." 


By  the  Act  of  1834,  the  powers  of  the  justices  to  decline  to  certify  the  rules, 
in  cases  where  they  might  deem  the  tables  insufficient,  was  withdrawn,  as  also 
v.as  the  priority  of  claim  by  societies  upon  the  effects  of  trustees  and  others. 
The  purposes  for  which  societies  might  be  formed,  however,  were  somewhat  ex- 
tended, and  were  stated  to  be  "for  the  mutual  relief  and  maintenance  of  all  and 
every  the  members  thereof,  their  wives,  children,  relations,  or  nominees,  in  sick- 
ness, infancy,  advanced  age,  widowhood,  or  at  any  other  natural  state  or  con- 
tingency whereof  the  occurrence  is  susceptible  of  calculation  by  average,  or  for  any 
other  purpose  which  is  not  illegal."  It  was  carefully  provided,  however,  that  for 
any  such  general  purposes,  not  being  "natural  contingencies,"  the  contributions 
should  be  kept  distinct  and  separate,  or  that  the  charges  for  these  benefits  should 
be  defrayed  by  levies  upon  the  members.  The  quinquennial  returns  were  continued. 
The  Act  of  1846  imposed  a  penalty  for  failure  to  forward  these  returns,  and  ap- 
pointed a  salaried  registrar,  who  was  only  to  register  rules  when  tables  were  certi- 
fied by  an  actuary. 

There  was  introduced  in  the  House  of  Commons  in  1849,  "A  Bill  to  make  better 
provision  for  the  Certifying  the  Tables  of  Contributions  and  Payments  of  Friendly 
Societies,  and  for  ascertaining  from  time  to  time  the  Solvency  of  such  So- 
cieties." This  bill  and  several  petitions  thereon  were  referred  to  a  Select  Com- 
mittee of  the  House,  who  were  empowered  to  take  evidence  and  to  report  their 
observations  thereon  to  the  House. 

The  principal  paragraphs  of  the  Report  are  as  follows : 

Your  committee  having  read  the  clauses  of  the  bill  referred  to  them,  thought 
it  advisable  to  apply  to  the  House  for  leave  to  take  evidence  on  the  subject;  and 
having  examined  16  witnesses,  submit  the  following  report: — 

As  the  object  of  all  these  voluntary  associations  is  in  some  way  to  provide  by 
mutual  assurance  for  the  relief  of  their  members  in  sickness,  in  old  age,  or  other 
natural  casualty  or  infirmity,  and  of  their  families  at  their  death,  it  is  obvious  that 
the  welfare  of  all  classes  is  much  concerned  in  the  sound  constitution  and  good 
management  of  such  societies.  Of  late  years,  by  the  exertions  of  benevolent  per- 
sons, and  by  means  of  a  more  extensive  and  accurate  collection  of  statistical  ma 
terials,  better  information  has  been  obtained  and  diffused,  of  the  calculations  and  prin- 
ciples upon  which  such  societies  ought  to  be  based.  Attention  has  been  much  "turned 
to  the  defects  inherent  in  the  old  clubs,  and  many  societies  on  a  sounder  system 
have  been  established ;  still  it  is  stated  by  the  secretaries  and  others  who  have  at- 
tended the  committee  that  in  the  great  majority  of  Friendly  Societies  and  clubs  at 
present  existing,  an  accurate  examination  of  their  accounts  would  show  that  the 
rate  of  contributions  is  not  sufficient  to  enable  them  to  pay  the  benefits  insured  thereby ; 
that  in  many  instances  they  have  been  compelled  to  reduce  or  suspend  their  allow- 
ances; and  those  societies  which  have  hitherto  kept  their  engagements  have  probably 
been  enabled  to  do  so  by  a  continual  introduction  of  young  members,  so  that  the 
unsoundness  of  their  tables  has  remained  unnoticed.  As  a  guide,  then,  and  a  safe- 
guard to  the  ignorant,  it  has  often  been  suggested,  and  was  pressed  upon  the  com- 
mittee by  some  of  the  witnesses  that  the  government  should  cause  model  tables 
to  be  constructed,  and  should  enforce  an  adherence  to  them. 

Mr.  Nieson,  the  noted  actuary,  was  the  first  witness  examined  by  the  committee : 

Question: — Will  you  state  to  the  committee  what  is  the  general  result  of  your 
experience  as  to  the  sufficiency  of  the  tables  of  Friendly  Societies?  Ans.: — That 
would  require  me  to  consider  two  classes  of  Friendly  Societies.  I  believe  Friendly 
Societies  as  they  existed  until  a  recent  date  were  generally  unsound,  and  chiefly 
so  from  an  inadequate  amount  of  contributions  being  required  by  their  tables,  at 
least  by  those  having  tables.  Many  of  the  societies  still  have  no  tables,  but  the  com- 
mittee arc  no  doubt  aware  that  the  9  and  10  Viet.  (1846)  makes  it  compulsory  on 
societies  established  after  the  passing  of  that  Act  to  have  tables  approved  by  com- 
petent authorities.  To  explain  fully  the  reason  why  Friendly  Societies  have  beer 


6 

so  unfortunate  in  acting  upon  inadequate  terms  would  require  rather  a  long  disqui- 
sition. It,  however,  may  be  summed  up  in  a  very  few  words.  The  subject  of 
Friendly  Societies  is  altogether  a  very  complicated  one;  in  fact  there  is  no  vital 
statistic  so  difficult  to  be  understood.  .  .  .  Then  having  in  view  the  purport  of 
the  original  question,  it  will  appear  from  this  explanation,  that  it  is  no  wonder 
that  until  a  recent  period  Friendly  Societies  were  found  to  be  exacting  inadequate 
contributions  for  the  benefits  they  promised.  The  difference  is  very  remarkable, 
and  for  some  particular  kinds  of  benefit  which  are  provided  for  by  Friendly  So- 
cieties adopting  one  data,  and  adopting  the  more  recent  data  resulting  from  my 
own  investigation,  it  came  under  my  own  inquiry  that  the  contributions  necessary 
for  some  purposes  would  be  doubled  in  consequence.  So  that  Friendly  Societies 
established  20  or  30  years  ago  upon  inadequate  data  may  now,  on  investigation,  find 
that  they  had  all  along  been  charging  one-half  less  for  some  of  the  paricular  benefits 
than  they  ought  to  have  charged;  and  many  societies  have  proved  this  by  experience. 
They  have  broken  down  in  consequence  of  inadequate  contributions.  Some  societies 
being  alarmed  by  a  gradual  deficiency  taking  place  year  after  year  in  their  funds, 
have  had  recourse  to  a  great  many  expedients  by  which  to  prop  themselves  up. 

Mr.  John  Finlaison  was  the  next  witness  and  .gave  an  account  of  the  data 
from  which  he  constructed  his  mortality  tables  in  1835,  and  Mr.  A.  G.  Finlaison, 
the  actuary,  testified  regarding  the  application  of  those  tables  to  Friendly  Societies. 
He  stated  that  at  the  time  (1850),  few  societies  would  accept  a  graduated  table 
of  contributions,  according  tcr  age  of  entry.  Those  which  had  done  so  would  only 
grade  for  ages  above  45  up  to  about  55,  when  "the  contributions  for  life,  above  that 
age  (55)  becomes  so  heavy  that  practically  they  are  of  no  use  to  the  society,  no 
member  being  able  to  pay  the  rates." 

It  must  be  remembered  that  the  rates  were  for  death  as  well  as  for  sickness  ben- 
efits, and  that  the  cost  for  both  increase  with  age,  being  excessive  at  the  advanced 
ages.  That  fact  was  demonstrated  by  these  societies,  as  here  shown,  prior  to  1835, 
and  became  such  a  threatening  danger  by  1850  as  to  justify  a  government  inquiry 
looking_  to  a  bill  to  make  better  provision  for  tables  of  contributions  and  payments 
and  "for  ascertaining  from  time  to  time  the  solvency  of  such  societies." 

Thus  it  is  seen  that,  70  years  ago,  the  same  questions  which  are  now  presented 
in  this  country  were  considered  and  passed  upon  in  England  with  the  consumma- 
tion in  a  satisfactory  solution  in  1875.  Had  conditions  in  Great  Britain  been  studied 
and  advantage  taken  of  them  by  fraternal  organizers  in  America,  the  meeting  of 
present  difficulties  need  never  have  occurred.  But  since  our  troubles  do  now  exist, 
the  next  best  thing  to  having  avoided  them,  is  to  remove  them.  In  that  work  we 
can  be  greatly  aided  by  giving  heed  to  reforms  inaugurated  and  remedies  applied  in 
the  Mother  Country. 

The  Act  of  1850  required  a  certificate  in  respect  to  annuity  tallies  only,  and  lim- 
ited the  amount  of  benefits,  especially  in  the  case  of  children's  assurance,  allowed 
investments  with  National  Debt  Commissioners  at  a  fixed  rate  of  interest  of  2d. 
per  cent  per  diem,  and  allowed  branches  to  register.  This  year  was  memorable  on 
account  of  the  founding  of  the  well-known  Royal  Liver  Friendly  Society,  which  within 
twenty  years  reached  a  membership  of  over  half  a  million. 

Most  of  the  features  of  the  recent  legislation  were  continued  by  the  Acts  of  1855, 
1858,  etc.,  the  position  of  Friendly  Societies  remaining  very  much  the  same  down  to 
the  important  legislative  enactment  of  1875. 

Two  years  after  the  Ancient  Order  of  United  Workmen  was  organized  in  the 
United  States,  and  ten  to  twenty  years  before  many  of  our  large  societies  were 
organized,  the  English  Government  had  such  consideration  and  regard  for  the 
importance  and  necessity  of  fraternal  insurance  that  a  Royal  Commission  was  ap- 


pointed  (1870)  with  instruction  to  thoroughly  and  exhaustively  investigate  the  sub- 
ject and  to  report  their  findings  to  Parliament 

That  investigation  covered  FIVE  YEARS  of  painstaking  and  continuous  work. 
The  report  of  the  Commissioners  is  the  most  valuable  official  contribution  to  insur- 
ance literature.  Its  importance  cannot  be  over-stated.  The  Act  of  1875  resulted 
from  the  broad  and  comprehensive  recommendations  of  the  Commissioners. 

That  report  and  the  resulting  Act  of  Parliament  should  have  been  studied  by  out 
legislators.  They  should  have  been  studied  by  those  who  have  been  organizing  and 
managing  the  Fraternal  Orders  in  this  country.  The  report  should  now  be  studied 
by  them  in  connection  with  the  Act  of  1896,  and  subsequent  amendments.  These 
comments  upon  the  legislation  affecting  Friendly  Societies  in  Great  Britain,  cannot 
be  more  appropriately  concluded  than  with  a  quotation  from  that  report  of  the 
Royal  Commission  of  1870 : 

REPORT  OF  THE  ROYAL  COMMISSION. 

In  addition  to  the  evidence  received  by  ourselves,  a  great  mass  of  valuable  in- 
formation is  recorded  in  the  report  of  our  Assistant  Commissioners,  to  whom  we. 
have  to  tender  our  best  thanks  for  the  zeal  and  ability  which  they  have  displayed  in 
the  fulfillment  of  their  allotted  portion  of  the  work. 

Without  pretending  to  have  exhausted  the  subjects  assigned  to  us  for  inquiry,  we 
venture  to  think  that  the  materials  we  have  collected  afford  better  means  of  under- 
standing them  in  their  various  bearings  than  any  which  have  yet  been  laid  before 
the  public. 

We  found,  indeed,  the  field  opened  before  us  to  be  so  wide  that  we  felt  obliged 
to  limit  it.  It  might,  for  instance,  have  been  interesting  to  trace  the  connection  of 
Friendly  Societies  with  the  Gilds  of  the  Middle  Ages,  their  analogy  to  which  has 
often  been  pointed  out,  and  of  which  the  constitution  has  been  lately  laid  open  mor<» 
thoroughly  to  investigation  than  ever,  through  the  publication  of  such  works  as  the 
late  Mr.  Toulmin  Smith's  English  Gilds ;  or  again,  to  compare  the  Friendly  Societies 
of  England  with  those  of  other  countries.  We  have  abstained  from  following  either 

line  of  inquiry In  obedience  to  your  Majesty's  commands  we  have  had 

prepared  a  sketch  of  the  course  of  legislation,  and  a  summary  of  the  Statute  Law, 
relating  not  only  to  Friendly  Societies,  but  to  all  the  classes  of  societies  with  which 
the  Registrar  of  Friendly  Societies  is  connected.  We  have  thought  that  in  thus  going 
somewhat  beyond  the  terms  of  our  instructions  under  this  head,  we  should  facilitate 
the  consideration  of  questions  which  will  presently  arise  with  reference  to  the  office 
and  duties  of  the  registrar. 

The  evils  to  which  Friendly  Societies  are  most  subject  may  be  divided  into  (i) 
those  which  arise  from  the  want  of  proper  information,  and  which  generally  affect 
the  principles  on  which  the  society  is  founded:  and  (2)  those  which  arise  from 
improper  management,  which  may  be  the  result  either  of  ignorance,  or  of  negligence, 
or  of  fraud.  As  regards  the  first  class  of  evils,  we  believe  that  it  is  in  the  power 
of  the  government  to  do  a  great  deal  to  correct  it,  without  inconvenience  to  the 
public  and  without  any  undue  interference  with  the  liberty  of  the  promoters  of 
societies.  As  regards  the  second  class,  there  is  more  difficulty,  though  we  believo 
that  something  may  be  done  in  the  way  of  securing  publicity,  and  of  providing  readier 
means  for  the  detection  and  punishment  of  fraud.  Possibly,  too,  it  may  be  found 
feasible  and  desirable  for  the  government  itself  to  enter  directly  into  competition 
with  certain  classes  of  societies  and  to  afford  the  public  an  alternative  provision 
for  certain  classes  of  objects.  But  this  is  a  matter  to  which  we  shall  refer  here- 
after. 

From  the  details  previously  given,  it  would  appear  that  the  condition  of  Friendly 
Societies  is  generally  _  far  from  being  such  as  to  afford  to  their  members  any  secur- 
ity that  they  will  receive  the  benefits  for  which  they  have  subscribed. 

A  main  cause  of  the  widespread  insolvency  of  Friendly  Societies  is  the  inade- 
quacy of  the  rates  of  premiums  for  the  benefits  promised. 

Before  a  proper  table  of  premiums  can  be  constructed,  the  following  preliminary 
inquiries  are  necessary:  (i)  What  are  the  occupations  and  conditions  of  life  of  the 


8 

persons  who  are  likely  to  constitute  the  society?  (2)  What  rates  of  sickness  and 
mortality  will  such  a  society  probably  experience?  (3)  What  table  of  premiums  prob- 
ably corresponds  with  such  experience? 

We  desire  to  draw  particular  attention  to  the  suggestion  which  we  have  made, 
that  the  government  should  prepare  and  publish  proper  tables  of  contributions  and 
benefits. 

It  appears  to  us  that  the  weak  point  which  is  common  to  all  classes  of  Friendly 
Societies  is  the  uncertainty  which  prevails  as  to  the  proper  rates  of  premium  which 
should  be  charged  for  the  various  classes  of  benefits  which  they  promise.  We  have 
already  drawn  attention  to  this  subject,  and  have  shown  that  the  inadequacy  of  the 
premiums  is  the  cause  of  embarrassment  even  to  some  of  the  highest  and  best  man- 
aged societies.  To  many  it  is  the  cause  not  only  of  embarrassment,  but  also  oi 
insolvency  and  ruin.  Two  methods  of  checking  this  evil  suggest  themselves.  Fresh 
efforts  might  be  made  to  prepare  trustworthy  tables  adapted  to  all  the  various  cir- 
cumstances with  which  different  societies  have  to  deal;  or,  recourse  might  be  had, 
more  systematically  than  at  present,  to  periodical  valuations  of  the  assets  and  liabil- 
ities of  each  society,  followed  by  the  necessary  corrections  of  the  table  of  premiums 
and  benefits.  We  believe  that  both  of  these  measures  should  be  adopted.  The 
government  should  employ  competent  actuaries  to  draw  up  some  model  tables,  which 
might  be  commended  to  the  promoters  of  Friendly  Societies,  though  their  adoption 
should  not  be  made  compulsory.  It  would  probably  not  be  long  before  their  value 
would  be  recognized ;  and  we  may  be  sure  that  there  would  never  fail  to  be  persons 
interested  either  in  existing  societies  or  in  the  welfare  of  the  classes  for  whose  ben- 
efit they  are  intended,  who  would  take  the  trouble  of  comparing  the  tables  and  rules 
of  particular  societies  with  the  government  standard,  and  of  ascertaining  how  far 
they  were  or  were  not  in  accordance  with  them. 

(Following  this  suggestion  the  comprehensive  report  by  the  Chief  Registrar  was 
published  in  1880,  with  tables  of  rates,  etc.  In  1896  followed  the  elaborate  report  by 
Mr.  Sutton,  Actuary  to  the  office  of  Chief  Registrar. — Landis.) 

We  attach,  however,  much  more  importance  to  properly  conducted  periodical  valu- 
ations, and  to  corrections  made  from  time  to  time  in  the  tables  according  to  the  re- 
sults of  those  valuations,  than  to  the  original  tables  themselves;  and  we  consider  that 
such  valuations  should  be  made  compulsory  upon  all  registered  societies.  Two  difficul- 
ties at  present  discourage  many  societies  from  having  recourse  to  them,  though  all 
persons  conversant  with  the  subject  agree  as  to  their  utility  and  importance.  The 
first  difficulty  is  the  costliness  of  the  process;  the  second  the  uncertainty  of  the 
results  arrived  at  by  different  actuaries  proceeding  on  different  principles.  Both  these 
difficulties  might  be,  to  a  great  extent,  obviated,  if  model  forms,  not  only  of  tables, 
but  also  of  valuations,  were  prepared  under  the  direction  of  the  government.  With 
these,  and  with  the  aid  of  well  arranged  returns,  which  the  society  would  have  to 
furnish,  valuations  might  be  conducted  cheaply,  and  on  an  uniform  principle.  Perhaps 
it  would  be  well  that  the  government  should  in  the  case  of  the  first  valuation  of 
any  society  allow  it  to  call  in  the  services  of  the  government  valuer  free  of  charge. 
For  subsequent  valuations  a  small  fee  should  be  demanded. 

It  is  only  possible  to  give  a  brief  outline  of  the  changes  effected  by  the  great 
Act  of  1875.  By  this  Act  the  law  relating  to  Friendly  Societies  was  both  consolidated 
and  amended. 

The  following  provisions  of  the  Act  may  be  mentioned  as  among  the  most 
important : 

(1)  The  maintenance  of  the  voluntary  principle,  as  respects  registration  and  the 
actuarial  certification  of  tables. 

(2)  The  continuance  of  the  quinquennial  and  annual  returns. 

(3)  The   limitation   of  benefits,   especially   for   infants'    assurances,    this   provision 
also  applying  to  industrial  assurance  companies. 


9 

(4)  The  authorizing  of  the  treasury  to  issue  regulations  from  time  to  time,  and 
the  power  conferred  on  the  registrars  to  appoint  inspectors,  when  duly  requested,  to 
inquire  into  the  management  of  societies,  and  call  general  meetings  of  the  members. 

(5)  The  compulsory  valuation  of  all  registered  societies  every  five  years,  and  the 
provision  for  the  appointment  of  public  valuers  by  the  treasury,  who  might  undertake 
such  valuation. 

(6)  The   reconstruction   of  the   Registry   Office,    resulting   in   the   appointment   of 
an  actuary  to  the  registrar. 

A  few  amending  Acts,  of  very  little  importance,  were  passed  during  the  twenty- 
one  years  from  1875  to  1896.  In  the  latter  year  a  thorough  revision  was  made  oi 
laws  affecting  Friendly  Societies,  which  is  known  as  the  Friendly  Societies  Act, 
August  7?  1896,  and  which  (with  a  few  minor  changes)  remains  in  force  and  effect 
at  this  writing). 

The  Act  of  1896  was  the  most  important  since  the  first  one  in  1793.  Its  detailed 
provisions  are  well  worth  careful  study. 

In  1911  the  Parliament  of  Great  Britain  enacted  a  general  law,  a  scheme  for 
National  Insurance  of  the  working  men  and  women  of  that  country.  The  scheme 
so  nearly  duplicates  the  plans  of  Friendly  Societies  in  the  way  of  granting  benefits 
that  a  mutual  arrangement  for  cooperation  was  made  between  the  government  and 
the  Societies  "approved"  by  the  Commissioners.  Whether  or  not  the  final  out- 
come will  be  exclusive  compulsory  State  Insurance  to  the  absorption  or  dissolu- 
tion of  Friendly  Societies  as  independent  organizations  is  a  mooted  question.  Well 
informed  and  experienced  officials  of  the  societies  are  pessimistic  in  their  forecasts 
of  the  future.  The  relations  between  the  governmnt  and  the  societies  are  compli- 
cated and  as  yet  unsettled,  but  it  is  to  be  hoped  that  these  great  Provident  Institu- 
tions may  be  able  to  continue  their  beneficent  work  by  granting  additional  protection 
to  the  comparatively  small  benefits  allowed  under  the  National  Insurance  Act. 


FRATERNAL  BENEFICIARY  ORDERS. 

The  Fraternal  Beneficiary  Associations  in  the  United  States  and  Canada  were 
modeled  on  the  pattern  of  Fraternal  Orders  with  secret  work  a  dominating  feature, 
There  was  a  central  authority  (usually  assuming  the  name  of  "Supreme")  ;  and 
subject  to  central  supervision;  there  were  subordinate  bodies  with  authority  circum- 
scribed to  a  State  or  "Jurisdiction,"  (usually  assuming  the  name  of  "Grand')  ;  and, 
subject  to  dispensation  and  regulation  from  the  "Supreme"  or  "Grand"  jurisdictions, 
there  were  local  "Lodges,"  or  "Councils,"  or  "Camps,"  or  "Tents,"  or  other  designa- 
tion characteristic  of  the  organization. 

The  words  quoted  from  Hardwick,  written  sixty  years  ago  concerning  the 
early  Friendly  Societies,  apply  to  the  Fraternal  Beneficiary  Societies  as  they  existed 
in  this  country. 

"The  singularity  of  some  of  their  names,  the  secrecy,  the  mummery,  and  the 
mystery  which  attended  their  proceedings,  proved  peculiarly  attractive  to  the  great 
body  of  the  operative  population,  while  they  at  the  same  time  excited  the  distrust, 
the  suspicion,  and  sometimes  the  ridicule  of  the  wealthier  and  better  educated  por- 
tions of  society." 

The  local  lodges,  or  councils,  or  by  whatever  name  known,  usually  provided  some 
form  of  relief  to  living  members,  while  the  grand  or  supreme  bodies  issued  certificates 
promising  a  death  benefit  "not  to  exceed"  the  amount  of  one  assessment  upon  all  of 


10 

the  members,  or  the  amount  of  one  assessment  "not  to  exceed"  a  designated  sum 
varying  from  $500  to  $5,ooo. 

The  Ancient  Order  of  United  Workmen,  the  American  Legion  of  Honor,  the 
Knights  of  Honor,  the  Knights  of  the  Maccabees,  the  Catholic  Mutual  Benefit  Asso- 
ciation, the  Catholic  Knights  of  America— in  fact,  all  of  the  original  and  well  known 
societies  in  the  United  States  and  Canada— levied  a  level  and  uniform  assessment, 
regardless  of  age,  occupation,  or  residence,  and  with  meagre  restrictions  upon  health, 
basing  the  number  of  assessments  upon  the  claims  incurred  and  collecting  them  from 
the  survivors  after  deaths  were  reported. 

The  certificate  of  membership  had  neither  the  form  nor  design  of  a  contract 
of  insurance. 

The  promise  to  pay  a  sum  at  the  death  of  a  member,  not  in  excess  of  the  volun- 
tary contributions  of  survivors,  was  not  made  in  the  way  of  a  binding  financial  obli- 
gation, but  rather  in  satisfaction  of  the  law  of  social  benevolence  which  requires  that 
every  man  shall  endeavor  to  assist  others. 

The  limitation  of  the  money  benefit  to  the  contributions  that  might  be  received 
for  its  payment  placed  the  transaction  in  the  category  of  a  charity.  In  these  cir- 
cumstances it  gave  little  concern  to  the  officials  of  large  societies  when  the  original 
and  simple  form  of  certificate  of  membership  was  changed  to  bond-like  appearance 
and  with  the  maximum  possible  amount  of  benefit  largely  displayed  in  gilt  letters. 

The  effect  upon  the  holder  was  an  assurance  of  a  definite  sum  payable  at  death, 
and  the  development  finally  was  to  produce  an  insurance  contract  of  a  fixed  char- 
acter enforceable  at  law. 

However,  the  members  changed  their  conceptions  of  fraternal  protection  only  in 
respect  of  the  benefit  side  of  the  contract.  They  continued  to  regard  the  contribution 
side  as  demanding  nothing  more  than  voluntary  donations  in  the  way  of  charity. 

Until  about  1888  (nearly  100  years  after  the  first  Friendly  Society  Act)  legis- 
lators placed  the  Fraternal  Beneficiary  Associations  in  the  list  with  charitable  organ- 
izations and  did  not  undertake  to  regulate  or  supervise  them,  contenting  themselves, 
when  occasionally  moved  to  action,  with  restrictive  measures  that  limited  their  scope 
of  operation,  or  exempted  them  altogether. 

Insurance,  Commissioners  paid  little  or  no  attention  to  the  Fraternal  Or- 
ders, treating  them  as  without  the  realm  of  life  insurance  organizations— and,  indeed, 
holding  that  they  would  be  encroachng  upon  the  rights  and  privilges  of  the  life  com- 
panies were  they  to  issue  life  insurance  contracts  with  mathematically  determined 
rates  of  contribution. 

In  this  connection  is  given  a  recent  ruling  of  the  Commissioner  of  Internal  Rev- 
enue, which  reflected  the  prevailing  opinion  held  by  officials  in  the  executive  and 
judicial  departments  of  State  and  National  governments  of  the  Union.  While  pars- 
ing upon  the  question  of  the  taxation  of  policies,  Commissioner  Wilson  discusses  the 
question  of  profit,  and  addresses  himself  to  what  is  contemplated  by  the  phrase 
"organized  and  conducted  not  for  profit."  He  says,  in  part : 

An  association  coming  within  the  exempted  classes  which  is  organized  and  does 
business  on  the  plan  of  levying  a  sum  upon  its  members  to  pay  losses,  or  losses  and 
expenses,  as  incurred,  is  prima  facie  not  doing  business  for  profit.  This  is  in  case 
where  the  assessments  are  made  to  provide  for  the  payment  of  losses  as  they  occur. 

Such  companies  as  make  assessments  based  upon  fixed -premiums,  to  be  collected 
at  regular  intervals,  without  regard  to  whether  or  not  a  loss  actually  occurs,  are 
companies  that  are,  in  the  opinion  of  this  office^  prima  facie  conducted  for  profit. 

Progress  toward  permanency  would  be  forever  blocked  were  such  an  opinion  to 
take  control  of  legislatures.  Only  ignorance  of  insurance  principles  and  a  wrong 


1 1 

conception   of   fraternal   protection   can  excuse  such   an  opinion.     A   still  more   exag- 
gerated case  is  the  following  from  a  decision  by  the  Supreme  Court  of  Pennsylvania  : 

The  first  specification  charges  error  in  admitting  the  application  thus  referred  to. 
This  is  grounded  on  the  assumption  that  defendant  (the  A.  O.  U.  W.)  is  an  In- 
surance Company,  and  the  contract  sued  on  is  a  contract  of  assurance  on  the  parr 
of  the  plaintiff's  husband  for  her  benefit.  .  .  .  Such  assumption,  however,  i^ 
unwarranted.  The  defendant  is  NOT  AN  INSURANCE  COMPANY,  but  belongs  to 
the  distinctly  recognized  class  of  organizations  known  as  benevolent  organizations. 
.  .  .  What  is  known  as  a  BENEVOLENT  ORGANIZATION,  however,  has  a 
wholly  different  object  and  purpose  in  view.  The  great  underlying  purpose  of  the 
organization  is  not  to  indemnify  or  secure  against  loss ;  its  design  is  to  accumulate  a 
fund  from  the  contributions  of  its  members  for  "Beneficial  or  Protective  purposes," 
to  be  used  in  their  own  aid  or  relief,  in  the  misfortunes  of  sickness,  injury  or  death. 
The  benefits,  although  secured  by  contracts,  and  for  that  reason  to  a  limited  extent 
assimilated  to  the  proceeds  of  insurance,  are  not  so  considered.  Such  societies  are 
rather  of  a  PHILANTHROPIC  OR  BENEVOLENT  CHARACTER;  their  bene- 
ficial-features may  be  of  a  narrow  or  restricted  character;  the  motives  of  the  mem- 
bers may  be,  to  some  extent,  selfish ;  but  the  principle  upon  which  they  rest  is  founded 
in  the  considerations  mentioned.  These  benefits,  by  the  rule  of  their  organizations, 
are  payable  to  their  own  .unfortunates  out  of  funds  which  the  members  themselves 
have  contributed  for  the  purpose,  NOT  AS  AN  INDEMNITY  OR  SECURITY 
AGAINST  LOSS,  'but  as  a  PROTECTIVE  RELIEF  in  case  of  sickness  or  injury, 
or  to  provide  the  means  of  a  decent  burial  in  the  event  of  death.  Such  societies 
have  no  capital  stock.  They  yield  no  profit,  and  their  contracts,  although  beneficial 
and  protective,  altogether  exclude  the  idea  of  insurance,  or  of  indemnity,  or  of  secur- 
ing against  loss. 

The  original  idea  of  benevolence  and  charity  still  prevails  and  the  legal  status  of 
Fraternal  Beneficiary  Societies  is  by  no  means  settled.  Court  decisions  are  conflict- 
ing, but  fortunately  uniformity  in  State  legislation  is  making  rapid  progress,  and  the 
day  is  not  distant  when  the  business  of  these  Associations  will  be  conducted  upon 
safe  and  sound  methods  under  supervision  wisely  designed  for  the  good  of  all  con- 
cerned. 

It  takes  time  and  patient  nursing  to  cure  an  ailment  such  as  afflicted  the  Fraternal 
Beneficiary  Societies. 

Consider  their  origin  and  one  cannot  be  surprised  at  the  resulting  financial  diffi- 
culties in  which  they  became  involved. 

Why  should  these  Societies  have  been  considered  to  assume  any  deferred  finan- 
cial obligation  when  the  outstanding  promise  was  to  pay  as  a  benefit  the  sum  of 
one  assessment,  provided  it  did  not  exceed  a  stated  amount? 

Such  a  promise  could  be  fulfilled  on  the  payment  of  one  dollar,  if  that  were  the 
amount  of  one  assessment. 

Why  should  such  Societies  accumulate  funds  as  a  guarantee  for  the  settlement  of 
deferred  liabilities  in  the  way  of  future  death  claims?  They  have  the  right  to  levy 
an  unlimited  number  of  assessments.  If  one  assessment  will  not  satisfy  the  matured 
claims,  they  can  levy  another.  If  still  unsatisfied,  they  can  levy  another  and  another 
until  the  claims  are  paid,  or  until  dissolution  results  from  withdrawals. 

There  was  never  a  simpler  scheme  for  the  liquidation  of  liabilities  ! 

Its  simplicity  is  not  altogether  in  the  power  of  repeated  levies ! 

If  the  assessments  produce  no  funds,  that   fact  discharges  the  debt ! 

From  the  viewpoint  of  the  analyst,  the  post  mortem  plan  of  assessments-as- 
needed  is  a  perfect  scheme  for  financing  a  concern  on  Hope. 

But  Hope  is  the  greatest  of  flatterers,  and  thousands  have  been  allured  by  her 
prodigal  promises  and  plausible  presentations  ultimately  to  find  they  had  no  other 
possession  but  Hope,  and  finally  to  realize  nothing  but  Despair. 


12 

It  is  a  sad  commentary  upon  the  progress  of  the  human  race  that  good  men 
with  good  intcntior.s  so  often  will  adopt  defective  means  for  the  execution  of  good 
purposes. 

And  more  regrettable  is  the  fact  of  the  repetition,  generation  after  generation,  of 
defective  means  for  good  purposes,  ending  in  failure. 

Probably  most  regrettable  of  all  is  that  the  trained  minds  of  judges  and  legislators 
go  far  astray  in  their  analysis  and  conception  of  unsound  plans  of  life  insurance — 
notably  the  learned  Justices  of  the  Court  of  Appeals  of  the  Great  State  of  New  York. 

For  a  long  time  neither  the  managers  nor  the  members  of  Fraternal  Beneficiary 
Societies,  nor  the  courts,  nor  the  legislatures  seemed  able  to  distinguish  between 
the  fraternal  and  the  business  side  of  these  Associations,  notwithstanding  the  fact 
that  the  managers  were  construing  and  the  members  holding  the  certificates  as  insur- 
ance contracts  with  fixed  benefits. 

There  was  and  is  an  honest  conviction,  not  readily  surrendered,  that  fraternal 
co-operation  relieves  societies  from  the  business  necessity  of  demanding  contributions 
equivalent  in  value  to  the  benefits  promised,  and  from  being  assessed  according  to 
the  insurance  risk  assumed. 

At  this  time  one  of  the  greatest  of  our  American  Fraternal  Beneficiary  Societies 
is  in  a  struggle  with  its  members  and  the  courts  to  determine  the  question  of  ade- 
quate contribution  rates,  and  whether  or  not  they  can  be  enforced  against  members 
who  relinquish  not  a  dollar  in  their  demand  for  protection  to  the  full  face  value  of 
their  certificates. 

Proof  beyond  dispute  is  submitted  to  show  that  some  members  contribute  to  the 
funds  less  than  the  actual  costs  of  their  protection,  and  that  the  deficiencies  thus 
created  must  be  made  good  by  appropriations  from  the  contributions  of  other  mem- 
bers who  pay  in  excess  of  the  equitable  costs  of  their  protection. 

Notwithstanding  this  undisputed  fact,  the  members,  who  receive  benefit  for  which 
they  do  not  pay  its  full  worth,  contend  that  it  is  a  condition  incident  to  fraternal  co- 
operation for  mutual  protection. 

They  believe,  or  pretend  to  believe,  that  it  is  consistent  with  brotherly  and  fra- 
ternal conduct  to  solicit  persons  to  join  these  Societies  and  then  charge  them  in 
excess  of  the  costs  of  their  protection,  and  to  appropriate  such  excess  to  their  own 
benefit. 

Hundreds  and  hundreds  of  times  I  have  stood  before  conventions  and  gatherings 
of  fraternal  people  and  demonstrated  from  the  actual  experience  of  the  Society,  to 
whose  members  I  was  talking,  that  some  of  those  present  were  contributing  less 
than  half  of  what  it  cost  the  Society  to  carry  the  risk  of  their  insurance  benefit,  and 
that  the  Society's  loss  on  them  was  made  up  from  surplus  contributions  of  others. 
I  have  explained  the  inequity  of  such  procedure.  I  have  pointed  out  that  it  is  not 
different  in  principle  to  appropriate  from  a  common  trust  fund  an  unequal  share  of 
purchased  articles — as  might  be  the  case  in  a  co-operative  store  where  some  would 
pay  less  than  the  cost  of  what  they  bought,  while  others  would  be  over-charged.  I 
have  put  the  question  directly  to  my  auditors,  whether  or  not,  if  they  were  con- 
tributors to  the  funds  of  a  co-operative  store,  they  would  support  and  continue  a 
management  which  let  some  members  have  groceries  at  50%  of  the  cost  and  charged 
others  150%.  I  have  never  yet  had  any  one  defend  such  a  plan  of  management  for 
a  cooperative  store,  or  for  a  savings  bank  where  deposits  of  one  were  paid  out  to 
another,  even  when  it  was  assumed  that  those  questioned  were  the  persons  to  be 
benefited.  Nevertheless,  I  have  heard  some  of  the  same  people  vigorously  and  elo- 
quently defend  the  insurance  plan  of  fraternal  orders  under  which  members  were 


13 

charged  more  than  their  equitable  proportion  in  order  that  others  might  pay  less  than 
their  equitable  proportion  of  the  common  cost  of  insurance  protection  to  the  whole 
membership. 

The  argument  in  defense  was  that  such  had  been  the  original  conception  of  fra- 
ternal co-operation  for  mutual  insurance  protection; 

That  to  change  the  plan  after  a  number  of  years  of  operating  under  it  would 
impose  upon  the  old  members,  and  "freeze  out"  the  aged  who  had  "borne  the  heat 
and  burden  of  the  day''  when  personal  work  and  sacrifice  were  required  for  the 
Society's  very  existence; 

That  the  younger  members  of  today  must,  in  their  turn,  make  sacrifices  in  the 
way  of  contributions  toward  the  cost  of  protection  for  those  who  had  grown  grey  in 
the  service ; 

That  while  it  would  be  unfair  and  unjust  and  probably  dishonest  to  overcharge 
one  patron  of  a  co-operative  store  in  order  that  another  might  have  his  purchase  at 
less  than  cost,  and  while  it  certainly  would  be  dishonest  to  take  from  the  savings 
account  of  recent  and  young  depositors  in  a  savings  bank  for  overpayment  to  aged 
patrons  because  they  had  lost  their  earning  power  and  needed  the  money,  and  while 
it  would  be  wrong  to  permit  a  regular  life  insurance  company  to  charge  some  more 
and  others  less  than  their  equitable  share  for  insurance  cost,  yet  the  reason  that  it 
would  be  unfair  a,nd  unjust  or  dishonest,  or  wrong  in  these  instances,  was  because 
it  was  not  the  original  nor  recognized  plan  for  the  operation  of  co-operative  stores, 
or  savings  banks,  or  life  companies,  and  therefore  they  were  not  to  be  compared  with 
Fraternal  Beneficiary  Societies  which  were  and  should  be  altruistic  in  their  practices 
and  charitable  in  their  purposes  and  altogether  benevolent  in  the  distribution  of 
funds ; 

That  there  was  no  distinction  between  members  in  respect  of  individual  share  in 
the  costs  of  protection,  because  each  member  contributed  toward  a  common  fund  from 
which  claims  for  benefits  were  paid,  and  no  member  had  any  individual  interest  in 
or  right  to  that  fund  unless  in  the  way  of  claim  for  benefit ; 

That  it  was  never  contemplated  in  fraternal  co-operation  to  resort  to  the  com- 
mercial requirement  of  business  conduct  by  demanding  a  contribution  rate  propor- 
tionate to  the  insurance  risk,  and  that  such  a  practice  would  be  as  foreign  to  the 
intents  and  purposes  of  these  mutual  associations  for  the  relief  of  the  distressed  and 
needy  as  would  be  the  attempt  to  fix  the  amount  of  donation  for  each  voluntary  con- 
tributor toward  any  charity  fund. 

Fraternal  Beneficiary  Societies  were  stamped  in  the  beginning  with  the  character 
of  charitable  and  benevolent  institutions. 

As  heretofore  stated,  the  members  tenaciously  insist  upon  the  continuance  of  that 
imprint  upon  their  assessment  levies,  while  they  have  no  hesitancy  in  construing  the 
promise  of  benefit  into  a  fixed  contractural  and  financial  right. 

The  New  York  Court  of  Appeals  has  rendered  opinions  sustaining  the  contention 
that  the  contribution  rate  cannot  be  adjusted  scientifically  and  equitably  to  the  in- 
surance risk,  without  the  consent  of  the  members,  while  holding  that  the  members 
have  a  vested  right  to  demand  the  full  amount  of  benefits  promised. 

The  Court  concedes  that  extra  assessments  may  be  levied  when  needed  for  the 
payment  of  matured  claims,  but  the  general  conclusion  is  in  support  of  the  con- 
tention that  Fraternal  Beneficiary  Societies,  as  at  present  constituted,  are  not  able 
to  enforce  the  well-established  rule  that  promised  contributions  should  be  adjusted 
to  provide  equitably  for  promised  benefits. 


14 

Undisputed  and  unquestioned  evidence  was  presented  to  the  Justices  in  which  it 
was  shown  that  ultimate  failure  was  inevitable  under  the  plan  of  operation  where 
the  contribution  was  not  adjusted  to  the  cost  of  protection  according  to  the  insurance 
risk  assumed. 

It  was  demonstrated  by  expert  testimony,  and  proved  by  the  actual  experience  of 
societies  which  had  tried  it,  that  recourse  to  extra  assessments  could  delay  but  would 
not  prevent  ultimate  failure  and  final  dissolution,  and  the  sacrifice  of  the  protection 
of  persistent  survivors  as  well  as  the  sacrifice  of  the  protection  of  those  forced  out  by 
repeated  assessments. 

The  reply  was,  that  the  Court  was  not  responsible  for  a  plan  that  would  result 
in  disaster — that  was  the  concern  of  those  who  inaugurated  and  accepted  insurance 
under  the  plan — that  the  Court  did  not  formulate  the  plan,  but  merely  decided  how 
the  plan  in  practice  should  be  operated  consistently  with  its  conditions  and  pro- 
visions, and  that  the  recognized  legislative  body  of  the  society  has  not  power  to 
change  those  conditions  and  provisions  even  to  save  the  corporate  existence  and  to 
conserve  the  interest  and  carry  out  the  desire  of  the  great  majority  of  the  members. 

The  Justices  of  the  Court  of  Appeals  arrived  at  the  same  conclusion  as  have  the 
members  who  protest  against  a  change  in  the  existing  plan  of  assessments. 

But  the  Justices  came  to  their  conclusion  by  an  entirely  different  course  of  rea- 
soning. They  construe  the  certificate  as  a  business  contract  between  a  corporation 
and  an  individual  and  exact  the  letter  of  the  bond;  they  disregard  the  contention  that 
the  corporation  is  a  fraternal  mutual  co-operative  association  of  individuals  related 
to  each  other  in  the  dual  capacity  of  insurer  and  insured,  and  therefore  are  obligated 
to  make  proper  and  adequate  provision  for  the  payment  of  benefits  as  a  condition 
precedent  to  making  claim  for  benefit;  they  proceed  to  the  decision  of  the  dispute 
between  the  corporation  and  a  certificate-holder  without  reference  to  the  fact  that 
the  latter  is  part  and  parcel  of  the  corporate  body  and  equally  responsible  with  every 
other  member  of  the  corporation  for  its  obligations  and  the  proper  provisions  for  the 
performances  of  its  promises. 

I  have  presented  at  length  this  phase  of  the  Fraternal  Society  situation  because 
of  its  obvious  difficulties. 

We  have  members  contending  that  it  is  in  accord  with  fraternal  principles  and 
brotherly  relations  to  impose  upon  young  and  recent  entrants  (as  long  as  they  will 
bear)  part  of  the  burdens  of  older  members  resulting  from  granting  insurance  at 
inadequate  contribution  rates. 

We  have  courts  deciding  and  commissioners  ruling  that  Fraternal  Beneficiary 
Societies  are  not  Insurance  Companies,  and  do  not  undertake  to  indemnify  against 
loss,  and  therefore  must  be  listed  with  charitable  organizations. 

Then  we  have  other  and  more  recent  court  decisions  to  the  effect  that  Fraternal 
Beneficiary  Societies  are  business  corporations  bound  by  the  letter  of  their  contracts, 
though  the  performance  kills. 

Finally  we  have  the  reassuring  and  'more  pleasant  aspect  of  legislative  enactments 
by  many  State  Legislatures  (that  of  New  York  amongst  them)  wherein  the  Fraternal 
Beneficiary  Societies  are  recognized  as  mutual  co-operative  insurance  associations 
with  the  right  and  power  to  adjust  required  contributions  to  promised  benefits  in 
such  manner  as  will  render  promises  possible  of  performance  and  preserve  cor- 
porate existence — and  at  the  same  time  recognizes  them  as  business  corporations  with 
obligations  to  their  members  and  to  the  public  which  demand  detailed  and  public 
exhibit  of  financial  condition,  past,  present  and  prospective. 


15 

The  development  of  the  Fraternal  Orders  is  strikingly  similar  to  that  of  the 
Friendly  Societies,  which  Mr.  Hardy  summed  up  in  the  terse  sentence  as  "being 
originally  purely  social  in  character,  subsequently  charitable  and  mutually  protective, 
and  only  in  recent  times  financial." 

Likewise  the  members  of  Friendly  Societies  advanced  more  rapidly  in  the  appre- 
ciation of  the  financial  obligation  to  them  from  the  Societies  than  from  them  to  the 
Societies. 

In  his  illuminating  essay  on  "Friendly  Societies  and  Sick  Clubs,"  Mr.  Reuben  Wat- 
son, after  alluding  to  the  demand  by  members  for  the  full  benefit  promised,  remarks : 
'The  enquiry  by  the  Royal  Commission  unquestionably  gave  an  impetus  to  the  newly 
awakened  discovery  that  the  adoption  of  graduated  contribution  tables  must  be  con- 
sented to  in  the  interest  of  justice  and  right.  Unfortunately,  it  is  difficult  to  make 
such  matters  clear  to  the  untrained  mind,  in  which  there  is,  however,  often  much 
ingenuity.  Members  of  Friendly  Societies  do  not  always  take  kindly  to  reforms 
which  necessitate  exposure  of  insufficient  contribution  rates.  When  proposed  reforms 
carry  with  them  increased  contribution  rates  they  have  been  known  to  be  opposed 
with  unrelaxing  vigor,  and  pet  schemes  and  haphazard  promptings  have  received 
remarkable  support  in  opposition  to  the  soundest  principles." 

The  concluding  sentences  have  application  to  the  Fraternal  Beneficiary  Orders 
in  this  country. 

The  opposition  in  the  United  States  and  in  Great  Britain  by  members  of  the 
Societies  to  increased  contribution  rates  brought  about,  in  both  countries,  the  expe- 
dient of  applying  increased  rates  to  new  members  and  leaving  those  for  existing 
members  unchanged.  This  only  delayed  the  day  of  reckoning. 

The  gross  injustice  of  collecting  from  new  entrants  more  for  the  same  benefit 
than  from  older  members  similarly  situated  in  respect  of  risk  at  date  of  entry  and 
appropriating  the  excess  to  the  use  of  the  older  members,  finally  forced  the  man- 
agements, in  both  countries,  to  put  aside  the  excess  to  the  special  benefit  of  the  new 
entrants,  and  thus  establish  an  adequate  rate  class. 

The  option  is  given  to  the  older  members  to  enter  this  class — usually  without 
medical  examination  and  often  with  concessions  that  rendered  the  rates  for  the  new 
class  inadequate. 

The  most  frequent,  and  the  most  disastrous,  option  is  to  permit  the  older  class  of 
members  to  take  the  new  graduated  rates  as  at  age  of  entry. 

This  concession  repeats  the  injustice  of  discriminating  between  members  simi- 
larly situated. 

The  new  member,  fresh  from  medical  examiner,  pays  the  rate  for  his  present 
age,  say  35,  while  the  re-rated  member  of  present  age  35  is  given  the  rate  at  age  25, 
because  he  entered  the  Society  at  that  age.  If  the  graduated  rate  is  the  proper  and 
correct  rate  at  age  35  for  the  freshly  examined  member,  certainly  it  is  none  too  low 
for  the  member  at  his  present  age  and  ten  years  removed  from  medical  examination. 

The  most  serious  condition  confronting  American  Fraternal  Beneficiary  Orders 
has  been  brought  about  by  re-rating  at  ages  of  entry. 

In  most  instances  the  members  concluded,  or  were  led  to  believe,  that  the  re- 
adjustment placed  the  Order  in  a  financially  solvent  position. 

The  contribution  rates  were  often  those  deduced  from  some  recognized  table  of 
mortality,  with  seldom  a  higher  interest  assumption  than  4%,  and  these  rates  were 
advertised  as  sufficient  upon  authority  of  some  actuary. 

The  advertisement  was  mainly  directed  to  securing  new  members.  There  was 
omission  of  the  fact  that,  in  respect  of  members  who  had  entered  the  Society  pre- 


16 

viotis  to  a  certain  date,  the  adequate  rate  had  been  made  inadequate,  say,  for  age  25 
by  being  applied  to  members  at  26,  27  ...  30,  35,  40  and,  sometimes,  50  years  of 
age;  and  similarly  in  the  application  of  other  rates  at  ages  advanced  beyond  those 
for  which  they  were  computed. 

Many  times  the  managing  officials  and  consulting  actuary  have  acquiesced  in  the 
re-rating  at  ages  of  entry,  first  because  it  was  left  to  them  to  accept  that  or  nothing, 
and  second  because  there  was  some  hope  that  savings  from  favorable  mortality  and 
gains  from  interest  earnings  and  forfeitures  by  lapse,  and  from  the  natural  recupera- 
tive force  of  these  Societies,  might  overcome  the  deficiency  created  by  such  readjust- 
ment. This  subject  is  hereafter  discussed  in  detail. 

Altogether  and  notwithstanding  admittedly  untoward  conditions  and  existing 
disadvantages,  progress  toward  solvency  by  the  recognition  and  adoption  of  true 
principles  is  being  made  steadily  and  surely. 

Improved  prospects  are  opening  up  in  all  directions,  whether  we  view  the  situa- 
tion from  the  standpoint  of  the  managers,  or  the  members,  or  the  insurance  com- 
missioners, or  the  legislators,  or  the  courts. 

The  requirements  of  annual  valuations  are  spreading  statistical  knowledge  that 
gives  a  better  understanding  of  the  relation  between  promised  benefit  and  required 
contribution. 

Since  the  agreement  at  Mobile  in  1910  between  the  Insurance  Commissioners  and 
representatives  of  Fraternal  Beneficiary  Orders  upon  a  Uniform  Bill  providing  for 
valuation,  there  has  been  acquired  more  information  in  regard  to  the  value  of  deferred 
promises  to  pay  death  and  disability  benefits  than  gained  during  the  entire  period  of 
operation  to  that  date. 

The  fact  that  statutory  enactment  compels  valuation  has  caused  a  general  inquiry 
into  the  meaning  and  effect  of  valuation.  This  subject  will  be  treated  at  length 
later  on. 

LEGISLATION. 

The  history  of  legislation  affecting  Fraternal  Beneficiary  Societies  is  so  closely 
identified  with  the  history  of  the  National  Fraternal  Congress  and  the  Associated 
Fraternities  of  America  that  separation  will  not  be  made  in  references  to  them. 

In  pursuance  to  a  resolution  adopted  in  June,  1886,  by  the  Supreme  Lodge  of  the 
Ancient  Order  of  United  Workmen,  a  committee  was  appointed  composed  of  Hon- 
orable A.  L.  Levi,  of  Minneapolis,  Minn. ;  Honorable  O.  F.  Berry,  of  Carthage,  111. ; 
Warren  Totten,  Esq.,  Barrister,  etc.,  of  Woodstock,  Ontario,  Dominion  of  Canada, 
and  Honorable  Leroy  Andrus,  of  Buffalo,  N.  Y.,  to  take  such  action  as  would  bring 
about  a  meeting  and  permanent  organization  of  representatives  of  Fraternal  Beneficiary 
Societies.  The  call  for  such  a  meeting  was  issued  September  i,  1886,  by  the  Chairman 
of  the  Committee,  Honorable  Leroy  Andrus,  and  on  November  16,  1886,  the  repre- 
sentatives of  various  Beneficiary  Societies  of  the  United  States  and  Canada,  respond- 
ing to  the  call,  met  at  the  Riggs  House,  in  the  City  of  Washington,  D.  C.,  on  Tuesday 
at  high  noon.  The  following  is  a  list  of  the  Societies  and  their  representatives : 

Ancient  Order  of  United  Workmen — Leroy  Andrus,  Buffalo,  N.  Y. ;  Warren 
Totten,  Woodstock,  Ontario;  A.  L.  Levi,  Minneapolis,  Minn.,  and  A.  L.  Berry,  Car- 
thage, 111. 

Knights  of  Honor — W.  H.  Barnes,  San  Francisco,  Cal. 

United  Order  of  Honor — A.  W.  Wishard,  Indianapolis,  Ind. 

Order  United  American  Mechanics — C.  H.  Stein,  Baltimore,  Md. 

Order  United  Friends — O.  M.   Shedd,  Poughkeepsie,  N.  Y. 

Empire  Order  of  Mutual  Aid— J.  H.  Meech,  Buffalo,  N.  Y. 


17 

Select  Knights,  A.  O.  U.  W.— R.  C.  Hill,  Buffalo,  N.  Y. 

Endowment  Rank  Knights  of  Pythias— Halvor  Nelson,  Washington,  D.  C. 

Equitable  Aid  Union — R.  N.  Seaver,  Columbus,  Pa. 

Knights  of  Macc'abees— N.  S.  Boynton,  Port  Huron,  Mich. 

Rayol  Arcanum— A.  C.  Trippe,  Baltimore,  Md. ;  J.  Haskell  Butler,  Boston,  Mass. 

Knights   of   Columbus— C.    P.   Kriezer,   New   York  City. 

Knights  Golden    Rule— J.    D.    Irving,    Toledo,    Ohio. 

United  Order  of  the  Golden  Cross— A.  M.  McBath,  Washington,  D.  C. 

Royal  Templars  of  Temperance— C.  K.  Porter,  Buffalo,  N.  Y. 

Home  Circle— J.   H.  Butler,  Boston,  Mass. 

It  was  estimated  by  the  Secretary  that  the  orders  and  their  membership  repre- 
sented at  the  Congress  were  as  follows : 

Ancient  Order  of  United  Workmen   I75,ooo 

Knights  of  Honor    130,000 

Royal    Arcanurn     70,000 

Order  of  United  American   Mechanics    40,000 

Royal  Templars  of  Temperance    22,000 

Equitable    Aid    Union    17,000 

Endowment  Rank,  Knights  of  Pythias   16,000 

Order  of  United  Friends    12,000 

Select  Knights,  A.  O.  U.  W 11,000 

Knights  of  Maccabees    1 1,000 

United  Order  of  the  Golden  Cross  9,ooo 

Empire  Order  of  Mutual  Aid   8,000 

United  Order  of  Honor    7,ooo 

Knights  of  the  Golden  Rule  9,000 

Home   Circle    5,ooo 

Knights  of  Columbia    .' 2,000 

A  grand  total  of  535,ooo  carrying  insurance  to  the  amount  of  about  $1,200,000,000. 

Very  little  more  was  done  at  this  first  meeting  than  to  declare  its  purposes,  pre- 
scribe the  characterstics  requisite  for  eligibility  in  its  membership,  ^  elect  officers  to 
give  it  an  organization  and  direct  the  appointment  of  several  committees  for  special 
fields  of  work.  The  first  officers  of  the  Fraternal  Congress  were  as  follows: 

President— Leroy  Andrus,  A.  O.  U.  W. 
First  Vice-President — A.   H.  Barnes,  Knights  of  Honor. 
Second  Vice-President—John   Haskell   Butler,  Royal   Arcanum. 
Recording  Secretary — R.  C.  Hill,  Select  Knights. 
Corresponding  Secretary — O.   M.   Shedd,   Order  United  Friends. 
Treasurer — Halvor  Nelson,  Endowment  Rank,  Knights  of  Pythias. 

The  first  regular  annual  session  of  the  National  Fraternal  Congress  was  held  at 
the  hall  of  the  Order  of  United  Friends,  in  Philadelphia,  November  15,  1887.  At  the 
evening  session  of  the  first  day  the  following  preamble  was  read  and  the  resolution 
adopted : 

WHEREAS,  There  are  a  large  number  of  Associations,  under  various  names,  pre- 
senting to  the  public  propositions  of  various  characters,  that  have  arisen  since,  and 
are  meeting  with  favorable  reception  because  of  the  success  of  the  standard  legitimate 
fraternal  benefit  orders,  and  while  it  is  not  the  province  of  this  Congress  to  either 
reflect  upon  or  endeavor  to  retard  the  growth  or  prosperity  of  any  organization,  yet 
we  deem  it  a  duty  to  ourselves  and  the  public  to  define  what  in  our  judgment  is  a 
Fraternal  Society,  and  to  be  recognized  as  such.  Therefore,  we  recommend  the 
adoption  of  the  first  resolution  amended  to  read  as  follows: 

Resolved,  That  a  Fraternal  Society  is  an  organization  working  under  ritual,  hold- 
ing regular  lodge  or  similar  meetings,  where  the  underlying  principles  are  visitation 
of  sick,  relief  of  distress,  burial  of  dead,  protection  of  widows  and  orphans,  educa- 
tion of  the  orphan,  payment  of  the  benefit  for  temporary  or  permanent  physical  dis- 
ability or  death,  and  where  these  principles  are  an  obligated  duty  of  all  members 
to  be  discharged  without  compensation  or  pecuniary  reward,  where  the  general  mem- 
bership attends  to  the  general  business  of  the  order,  where  a  fraternal  interest  in  the 


18 

welfare  of  each  other  is  a  duty  taught,  recognized  and  practiced  as  the  motive  and 
bond  of  the  organization. 

Resolved,  That  any  association,  however  worthy  in  business  point  of  view,  not 
possessing  the  characteristics  above  mentioned,  cannot  be  legitimately  termed  a  "Fra- 
ternal" Society  or  Order. 

The  Committee  on  Legislation  reported  that  there  had  been  no  changes  in  the 
laws  of  the  several  States  affecting  Fraternal  Beneficiary  Societies  except  in  Missouri. 
It  was  complained  that  the  legislation  in  that  State  was  entirely  in  the  interest  of  the 
assessment  Life  Insurance  Companies  and  was  antagonistic  to  the  people  at  large  who 
were  mainly  interested  in  Beneficial  Societies.  The  committee  claimed  that  "Its  effect 
was  to  force  the  thrifty  persons  of  moderate  means,  who  are  always  the  bulwark  of 
a  State,  to  pay  excessively  for  life  insurance  in  the  interest  of  corporations  who  con-- 
duct the  business  solely  for  profit,  and  to  deprive  them  of  the  privilege  and  advan- 
tage of  associating  themselves  together  in  the  fraternal  societies  for  the  benefit  of 
their  wives  and  children.  Its  animus  is  plainly  shown  by  a  brief  review  of  the  law. 
As  a  whole  it  is  copied  from  the  Massachusetts  Act  of  Assembly  of  1885.  The  first 
section  of  the  Massachusetts  Act  is  as  follows: 

Every  contract  whereby  benefit  is  to  accrue  to  a  party  or  parties  named  therein 
upon  the  death  or  physical  disability  of  a  person,  which  benefit  is  in  any  degree  or 
manner  conditioned  upon  the  collection  of  an  assessment  upon  persons  holding 
similar  contract,  shall  be  deemed  a  contract  of  insurance  on  the  assessment  plan  and 
the  business  involving  the  issuance  of  such  contracts  shall  be  carried  on  in  this  com- 
monwealth only  by  duly  organized  corporations,  which  shall  be  subject  to  the  pro- 
visions and  requirements  of  this  Act;  but  nothing  herein  contained  shall  be  construed 
as  applicable  to  organizations  which  conduct  their  business  as  fraternal  societies  on 
the  lodge  system  or  to  organizations  which  do  not  employ  paid  agents  for  soliciting 
business  or  limit  their  certificate  holders  to  a  particular  order  or  fraternity  or  to  the 
employees  of  a  particular  order  or  fraternity  or  to  the  employees  of  a  particular  town 
or  city,  designated  firm,  business  house  or  corporation  or  to  organizations  which  are 
unincorporated  and  limit  the  amount  of  every  certificate  issued  to  a  maximum  amount 
and  not  exceeding  $500  on  any  one  risk. 

The  Missouri  Act  copies  the  first  section  of  the  Massachusetts  law  verbatim,  but 
omits  the  words  exempting  fraternal  beneficial  societies  from  its  operation.  The 
omitted  words  are,  "but  nothing  herein  contained  shall  be  construed  as  applicable  to 
organizations  which  conduct  their  business  as  fraternal  societies  on  the  lodge  sys- 
tem," etc. 

The  committee  was  very  bitter  in  their  criticism  of  the  Act  and  of  the  Insurance 
Commissioner  of  Missouri,  because  of  the  fact  that  the  fraternal  societies  were  not 
exempted  from  the  law. 

Chairman  A.  C.  Trippe,  of  the  Royal  Arcanum,  was  very  eloquent  in  his  repre- 
sentations concerning  fraternal  beneficial  societies.  I  quote: 

The  Beneficial  Societies  are  Societies  of  the  people.  They  are  born  of  economy, 
thrift  and  domestic  love;  they  are  the  safeguards  of  the  industrious  and  the  honest 
middle  classes,  and  they  are  protests  against  the  demands  of  corporations  organized 
solely  for  the  purpose  of  gain,  which  in  their  excessive  demands  debar  the  man  of 
moderate  means  from  making  reasonable  provisions  for  his  household  upon  his  death. 
He  who  strikes  at  them  strikes  at  the  spirit  of  the  age. 

They  are  and  always  have  been  honestly  administered,  and  the  provisions  of  this 
law  under  their  system  it  i>s  impossible  to  comply  with.  No  pretense  that  it  was 
enacted  in  the  interest  of  their  membership  will  deceive  them.  They  have  not  asked 
for  such  a  law;  they  do  not  want  it.  The  assessment  life  insurance  companies  want 


19 

such  a  law  to  injure  the  beneficial  societies.  They  got  it.  The  people  of  Missouri 
and  of  the  country  want  to  know  why  the  Insurance  Commissioner  of  that  State 
is  favoring  legislation  and  corporations  which  compel  the  people  to  pay  $3.00  of  their 
hard-earned  money  for  life  insurance,  when  under  the  economies  and  advantages  of 
fraternal  societies,  which  eliminate  individual  and  corporate  profit  from  their  system, 
they  can  make  equal  provision  at  a  cost  of  one-third  of  that  sum  for  their  wives 
and  children. 

We  invite  all  of  the  beneficial  orders  to  unite  in  some  common  plan  to  meet  the 
emergency.  We  have  no  contest  with  life  insurance  organizations.  We  do  not  belong 
to  them  in  principle  or  in  practice.  We  do  not  intend  that  they  shall  injure  us,  or 
wrest  a  department  of  State  government  instituted  for  the  protection  of  the  people 
to  their  injury. 

The  second  annual  session  of  the  National  Fraternal  Congress  was  held  in  New 
York  City  in  November,  1888.  The  Committee  on  Legislation  reported  that  during 
the  year  1887-1888  legislation  adverse  to  fraternal  societies  had  been  attempted  in 
the  Dominion  of  Canada  and  in  the  State  of  Maryland.  I  quote  from  the  report: 

The  attempt  of  the  Insurance  Commissioner  of  Missouri  to  destroy  the  Fraternal 
Orders  has  been  foiled  as  yet  by  adverse  judicial  decision,  and  the  near  approach  of 
the  session  of  the  Legislature  encourages  the  hope  that  the  sacred  interests  which 
are  at  stake  may  obtain  remedy  of  the  wrong  by  proper  legislation.  In  the  Dominion 
of  Canada  a  very  complex  law  was  submitted  at  the  last  session  of  Parliament.  But 
amid  its  intricacies  it  was  possible  to  see  both  the  spirit  of  animosity  to  the  Fra- 
ternal Societies  and  legislative  provisions  which  would  maim  and  destroy  them. 
Through  the  energy  and  fidelity  of  Brother  Totten,  our  Vice-President,  assisted  by 
officers  of  other  Orders,  this  legislation  was  prevented. 

In  Maryland  the  Mutual  Cooperative  Societies  were  seized  with  a  horror  of 
what  was  called  the  conduct  of  the  Industrial  Insurance  organizations,  which  it  is 
charged  are  societies  that  collect  their  dues,  generally  five  cents  per  week,  of  members 
at  the  back  gate.  So  they  started  to  reform  them  by  Act  of  the  Legislature,  re- 
quiring a  deposit,  etc.  It  was  stated  in  the  bill  that  the  Royal  Arcanum  and  the 
other  leading  Fraternal  Societies  were  excepted  from  the  provisions  of  the  Act.  It 
was  also  stated  to  prominent  members  of  the  Fraternal  Societies  that  there  were 
already  too  many  Orders,  and  it  was  well  to  limit  their  multiplication,  and  soothe 
exemption  in  the  law  was  made  to  include  such  Fraternal  Societies  as  were  organized 
on  February  T,  1888.  The  contest  was  waged  with  great  activity  for  some  time 
between  the  Cooperative  and  Industrial  Orders,  and  a  bill  was  finally  passed  to 
its  third  reading,  which  contained  the  foregoing  provisions.  Upon  inspection  it  was 
found  that  this  bill,  in  its  apparently  innocent  provisions,  contained  an  admissson  of 
the  right  of  the  Insurance  Department  to  control  the  Fraternal  Orders,  and  the  repeal 
of  a  date  would  confirm  that  control  permanently.  Prompt  steps  were  taken,  the 
bill  withdrawn,  amended  and  passed  in  accordance  with  the  views  of  our  mem- 
bership. 

The  fourth  annual  session  of  the  National  Fraternal  Congress  was  held  in  Pitts- 
burgh, November,  1890,  and  the  President  in  his  address  used  the  following  lan- 
guage : 

There  is  another  question  that  I  will  call  to  your  attention  and  one  that  I  deem 
of  vital  importance.  How  are  we  to  protect  ourselves  from  the  many  fraudulent 
organizations  that  are  flooding  the  country  under  the  garb  and  cloak  of  fraternity? 
We  should  carefully  consider  this  question  as  one  of  deep  importance.  While  we 
should  not  do  anything  to  injure  in  any  way  any  legitimate  business  or  avocation,  we 
should  expose  fraud  and  counterfeits  wherever  found  and  denounce  them  in  no  un- 
certain terms.  Whether  or  not  it  would  be  wise  to  invoke  legislation  against  such  I 
am  not  prepared  to  say,  but  something  should  be  done  to  rid  the  country  of  the 
pirates  who  are  robbing  the  people  under  the  guise  of  fraternity. 

A  bill  was  drafted  in  1888  for  the  purpose  of  securing  uniform  legislation  and 
substantially  was  enacted  into  law  by  Massachusetts.  This  legislation  is  fully  re- 


20 

viewed  by  the  Committee  on  Legislation  at  the  third  session  of  the  National  Fra- 
ternal Congress.  At  the  fourth  session  of  the  Congress,  Honorable  John  Haskell 
Butler  reported  that  the  only  legislation  that  had  been  enacted  in  the  country  was  an 
amendment  in  1890  to  the  statute  of  1888  by  the  Legislature  of  Massachusetts,  whereby 
Sections  6,  9,  10,  u  and  12,  referred  to  on  page  25  of  the  proceedings  of  the  Congress 
of  the  third  annual  session,  were  amended  as  follows : 

SECTION  8.  Any  corporation  duly  organized  as  aforesaid,  which  does  not  employ 
paid  agents  in  soliciting  or  procuring  business  other  than  in  the  preliminary  organiza- 
tion of  local  branches,  and  which  conducts  its  business  as  a  fraternal  society  on  the 
lodge  system,  or  limits  its  certificate  holders  to  a  particular  order,  class  or  fraternity, 
or  to  the  employees  of  a  particular  town  or  city,  designated  firm,  business  house  or 
corporation,  may  provide  in  its  by-laws  for  the  payment,  from  time  to  time  as  re- 
quired, of  a  fixed  sum  by  each  member,  and  from  this  income  may  make  weekly  or 
other  payments  to  any  member  during  a  period  of  disability  of  such  member,  or  pay 
a  benefit  to  the  member  or  his  family  at  the  end  of  such  period  of  time  as  shall  be 
fixed  by  said  by-laws  and  written  in  the  benefit  certificate  issued  to  said  member ; 
provided,  that  the  sum  paid  as  sick  benefits  to  a  member  may  be  deducted  from  the 
total  amount  to  become  due  at  the  maturity  of  the  certificate.  The  money  derived 
from  assessments  as  set  forth  in  this  section  shall  be  divided  into  two  funds  as  fol- 
lows :  not  exceeding  50  per  cent  shall  be  set  aside  as  a  reserve  fund  for  the  exclusive 
payment  of  matured  endowment  certificates;  the  residue  from  each  assessment  shall 
be  placed  in  a  benefit  fund  to  be  applied  exclusively  to  the  payment  of  disability 
benefits,  and  no  portion  of  the  money  received  from  assessments  shall  be  devoted 
to  or  used  for  any  other  purpose,  or  carried  to  any  other  fund  than  as  herein  pro- 
vided. No  portion  of  said  securities  shall  be  drawn  except  upon  a  requisition  signed 
by  three-fourths  of  the  Executive  Committee,  or  other  officers  corresponding  thereto, 
and  endorsed  by  the  Insurance  Commissioner,  setting  forth  that  the  same  is  to  be 
used  for  the  purposes  of  the  trust;  provided,  that  any  such  corporation  within  a  period 
of  three  months  preceding  the  date  of  maturity  of  endowment  certificates  may  make 
any  necessary  assessments  to  enable  it  to  meet  such  obligations,  and  carry  the  entire 
amount  received  upon  such  assessments  to  the  reserve  fund ;  provided,  further,  that 
any  such  corporation  which  pays  death  benefits  may  make  assessments  therefor,  and 
may  hold  at  any  one  time,  as  a  death  fund  belonging  to  the  beneficiaries  of  anticipated 
deceased  members,  an  amount  not  exceeding  one  assessment  from  a  general  or  un- 
limited membership,  or  an  amount  not  exceeding  in  the  aggregate  one  assessment 
from  each  limited  class  or  division  of  its  members. 

SECTION  9.  Any  corporation  organized  under  or  conducting  its  business  in  ac- 
cordance with  the  provisions  of  this  Act,  which  does  not  pay  a  benefit  to  a  member 
or  his  family  at  the  end  of  a  fixed  period  of  time,  may  provide  in  its  by-laws  for  the 
payment,  from  time  to  time  as  required,  of  a  fixed  sum  by  each  member,  to  be  paid 
to  the  beneficiaries  of  deceased  members  in  such  amount  and  manner  as  shall  be  fixed 
by  said  by-laws. and  written  in  the  benefit  certificate  issued  to  said  member,  and  pay- 
able to  the  husband,  wife,  affianced  husband,  affiance's  wife,  relatives  of,  or  persons 
dependent  upon,  such  member.  Any  such  corporation  may  hold  as  a  death  fund 
belonging  to  the  beneficiaries  of  anticipated  deceased  members  an  amount  not  ex- 
ceeding five  assessments  from  a  general  or  unlimited  membership,  or  an  amount  not 
exceeding  in  the  aggregate  five  assessments  from  each  limited  class  or  division  of 
its  members.  Such  fund,  if  not  exceeding  one  assessment  as  aforesaid,  while  held  in 
trust,  shall  be  invested  in  securities  in  which  insurance  companies  are  allowed  by  law 
to  invest  their  capital,  or  deposited  in  safe  banking  institutions  subject  to  sight  drafts 
for  distribution  to  the  beneficiaries  aforesaid.  The  amount  of  such  fund  in  excess 
of  one  assessment  shall  be  deemed  an  emergencv  fund  and  shall  be  invested  in  securi- 
ties in  which  Insurance  Companies  are  allowed  by  law  to  invest  their  capital,  or  not 
exceeding  20  per  cent  thereof  in  a  building  for  use  and  occupancy  by  the  corporation 
as  its  home  office  within  this  commonwealth  ;  and  such  securities  shall  be  deposited 
in  trust  with  the  Treasurer  of  the  Commonwealth.  Such  corporation  may  also  provide 
in  its  by-laws  for  the  payment  from  time  to  time  of  a  fixed  sum  by  each  member, 
and  from  the  amount  thus  received  may  make  weekly  or  other  payments  to  members 
during  a  period  of  disability.  This  fund  shall  be  used  for  no  other  purpose  than  here- 
in prescribed,  and  no  assessment  therefor  shall  be  called  while  there  remains  on  hand 


21 

of  such  fund  an  amount  equal  to  that  received  from  one  assessment.  No  contract 
under  this  section  shall  be  valid  or  legal  which  shall  be  conditional  upon  an  agree- 
ment or  understanding  that  the  beneficiary  shall  pay  the  dues  and  assessments  or 
either  of  them. 

SECTION  10.  Any  corporation  organized  under  or  conducting  its  business  in  ac- 
cordance with  the  provisions  of  this  Act,  and  which  has  no  per  capita  tax,  may  make 
not  exceeding  three  assessments  per  year  to  meet  its  reasonably  necessary  expenses. 
The  purpose  of  such  assessment  shall  be  clearly  stated  in  calls  therefor,  and  no 
assessments  shall  be  called  while  the  amount  of  one  assessment  remains  on  hand. 

SECTION  n.  Fraternal  beneficiary  corporations,  associations  or  societies  organized 
nuder  the  laws  of  another  State,  not  transacting  in  this  Commonwealth  business  as 
herein  defined,  may  continue  such  business  upon  the  plans  heretofore  governing  them, 
as  reported  to  the  Insurance  Department,  and  by  otherwise  conforming  to  the  pro- 
visions of  this  Act. 

SECTION  12.  Every  corporation  doing  business  under  the  foregoing  provisions 
shall  annually,  on  or  before  the  first  day  of  March  in  each  year,  report  to  the  Insur- 
ance Commissioner  the  location  of  its  principal  office,  in  this  Commonwealth,  and  the 
names  and  addresses  of  its  President,  Secretary  and  Treasurer,  or  other  officers  an- 
swering thereto;  and  shall  make,  under  oath,  such  statements  of  its  membership  and 
financial  tranactions  for  the  year  ending  on  the  preceding  thirty-first  day  of  Decem- 
ber, with  other  information  relating  thereto,  as  said  Commissioner  may  deem  neces- 
sary to  a  proper  exhibit  of  its  business  and  standing;  and  the  Commissioner  may 
at  other  times  require  any  further  sworn  statement  he  may  deem  necessary  relating 
to  any  such  corporation. 

Any  fraternal  beneficiary  organization  incorporated  under  Chapter  429  of  the  Acts 
of  the  year  1888,  or  existing  under  the  laws  of  this  Commonwealth  and  transacting 
business  as  defined  in  said  chapter  and  amendments  thereto,  may  provide  in  the  same 
assessment  for  its  disability  and  death  funds ;  provided,  that  the  proportion  of  the 
assessment  to  be  used  for  either  purpose  shall  be  distinctly  stated  as  well  as  the 
amount  received  for  each  fund  held  and  used  in  the  manner  provided  therefor  by  law. 

Having  in  mind  the  fact  that  Chairman  Butler  ranked  as  one  of  the  leading  law- 
yers of  Boston,  his  concluding  paragraph  is  interesting : 

Your  committee  feels  assured,  more  by  reason  of  signs  in  the  air  rather  than  by 
any  definite  information  on  the  subject,  that  the  old  line  insurance  companies  are 
quietly  endeavoring  in  various  States  to  secure  legislation  which  shall  hamper  the  work 
of  the  fraternal  organizations.  Their  agents  profess,  publicly  and  in  private,  their 
belief  that  our  associations  have  been  of  inestimable  benefit  to  the  business  of  the  old 
companies,  and  that  they  prefer  that  they  should  exist  rather  than  that  anything  should 
be  done  to  interfere  with  their  work.  Nevertheless  we  cannot  avoid  the  conclusion 
that  wherever,  without  their  ostensible  action,  adverse  legislation  can  be  secured,  it 
will  be  quietly  done.  It  therefore  is  of  the  utmost  importance  that  fraternal  men, 
members  of  fraternal  orders  in  all  the  States,  should  keep  a  continual  and  sharp 
watch  upon  the  Legislatures  when  in  session,  and  have  some  member  favorable  to 
our  interests  whose  duty  it  shall  be  to  inspect  every  bill  bearing  upon  life  insurance 
subjects  and  taxation,  with  a  view  to  prevent  restricting  legislation.  It  would  seem 
as  if  all  which  remains  for  your  committee  to  recommend  is  that  their  successors 
shall  keep  on  in  the  work  mapped  out  for  them  by  the  Congress  and  so  far  as  possible 
protect  the  interests  of  the  fraternal  organizations  by  watchfulness  and  advice. 

I  have  quoted  at  length  from  the  important  provisions  of  the  Massachusetts 
statute,  because  it  was  taken  as  a  model  form  by  a  number  of  other  States,  and 
because  it  was  the  first  extended  legislative  enactment  concerning  Fraternal  Bene- 
ficiary Societies.  The  provision  for  the  payment  of  endowments  and  the  limitation 
of  the  amount  of  funds  to  the  amount  of  five  (Section  8)  or  one  (Section  9)  assess- 
ments are  noteworthy  features. 

The  interpretation  of  the  Certificates  of  Fraternal  Beneficiary  Societies  by  the 
Courts  usaully  is  made  upon  the  determination  of  their  legal  status  and  therefore  it  is 


22 

of  the  utmost  importance  that  careful  study  be  made  of  the  history  of  legislation. 
On  account  of  the  numerous  legislative  bodies  having  to  do  with  insurance  organiza- 
tions it  is  not  within  the  limits  of  space  which  can  be  devoted  to  the  subject  to 
make  a  thorough  review  of  laws  enacted  from  year  to  year.  Since  1888  virtually 
was  the  beginning  of  State  legislation  for  the  regulation  and  control  of  these  Socie- 
ties, and  by  1890  State  supervision  had  become  a  definite  policy,  I  believe  it  well  to 
give  a  synopsis  as  of  that  year — 1890. 

As  stated  the  sections  above  quoted  were  the  important  provisions  in  the  Massa- 
chusetts statute.  Others  were  as  follows: 

First. — That  seven  or  more  persons,  citizens  of  that  Commonwealth,  might  form 
a  fraternal  beneficiary  corporation  and  the  manner  of  the  organization  is  provided  for. 

Second. — There  is  a  definition  of  the  nature  of  the  corporation  and  its  operation. 

Third. — Fraternal  Beneficiary  Associations  organized  under  the  laws  of  another 
State,  but  transacting  business  in  Massachusetts,  shall  report  on  the  request  of  the 
Commissioner. 

Fourth. — The  report  is  required  to  be  made  on  or  before  the  ist  of  March  each 
year,  giving  amongst  other  specified  information  a  statement  of  its  membership  and 
financial  transaction  up  to  December  31,  preceding. 

Fifth. — It  provides  for  the  appointment  of  the  Insurance  Commissioner  as  the 
attorney  upon  whom  process  is  to  be  levied. 

Sixth. — Corporations  not  then  in  the  State  were  excluded  therefrom,  No  pro- 
vision is  made  for  their  admission. 

There  was  no  general  law  in  Canada  for  the  regulation  and  supervision  of  Fra- 
ternal Beneficiary  Societies,  and  the  exemption  clause  to  the  general  insurance  Act 
was  as  follows : 

Neither  the  consolidated  insurance  Act  (1877)  nor  this  Act  shall  apply  to  any 
society  or  association  of  persons  for  fraternal,  benevolent,  industrial  or  religious  pur- 
poses. Among  which  purposes  shall  be  the  assurance  of  the  lives  of  members  thereof 
exclusively ;  or  to  any  association  for  the  purpose  of  life  assurance  formed  in  con- 
nection with  such  society  or  organization  and  exclusively  from  its  members,  and 
insuring  the  lives  of  such  members  exclusively. 

There  were  no  general  statutes  for  the  regulation  or  supervision  of  Fraternal  Bene- 
ficiary Societies  in  Alabama,  Colorado,  Connecticut,  Delaware,  Georgia,  Illinois,  In- 
diana, Kansas,  Kentucky,  Maryland,  Michigan,  Minnesota,  Missouri,  Ohio,  Oregon, 
Pennsylvania,  Rhode  Island,  Texas,  Virginia  and  West  Virginia.  As  in  Canada  there 
were  exemption  clauses  to  the  general  insurance  laws,  and  I  quote  that  for  Illinois  as 
a  representative  provision  for  the  States  named : 

Provided,  that  nothing  herein  contained  shall  be  held  to  apply  to  any  organization 
of  a  truly  social,  religious  or  benevolent  character,  where  no  commissions  are  paid 
and  no  salaried  officers  or  agents  are  employed,  nor  to  any  local  association  or  society 
organized  under  or  subject  to  the  control  of  a  Grand  or  Supreme  body,  nor  to  any 
secret  organization  having  subordinate  lodges  or  councils  which  has  been  organized 
under  the  laws  of  this  or  any  other  State,  and  which  is  now  permitted  to  do  business 
in  this  State. 

There  were  no  laws  concerning  Fraternal  Beneficiary  Societies  in  the  States  of 
California,  Dakota,  District  of  Columbia,  Mississippi,  Nevada,  New  Hampshire,  New 
Jersey,  New  Mexico,  North  Carolina,  Tennessee,  Utah,  Washington  and  Wyoming. 
There  was  in  1890  a  law  pending  in  New  Hampshire. 

In  Florida,  South  Carolina,  Vermont  and  Montana,  there  were  no  laws,  exemption 


23 

or  otherwise,  relating  to  fraternal  societies,  but  there  had  been  department  ruling 
making  the  general  insurance  laws  applicable  to  fraternals. 

In  Maine,  Massachusetts,  Nebraska,  New  York  and  Wisconsin  there  were  special 
laws  concerning  Fraternal  Beneficiary  Societies.  The  Maine  law  was  similar  to  that 
in  Massachusetts  heretofore  quoted. 

The  Maine  law  of  1890  defines  the  business  of  Fraternal  Beneficiary  Associations 
as  follows: 

Any  corporation  duly  organized  as  aforesaid,  and  which  does  not  employ  paid 
agents  in  soliciting  and  procuring  business,  other  than  in  the  preliminary  organiza- 
tion of  local  branches,  and  which  conducts  its  business  as  a  fraternal  society,  on  the 
lodge  system,  or  limits  its  certificate  holders  to  a  particular  order,  class  or  fraternity, 
or  to  the  employees  of  a  particular  town  or  city,  designated  firm,  business  house,  or 
corporation,  may  provide  in  its  by-laws  for  the  payment  from  time  to  time,  of  a 
fixed  sum  by  each  member,  and  from  this  income  may  make  weekly  or  other  payments 
to  each  member  during  the  period  of  disability  of  such  member.  Such  corporation 
may  also  provide  in  its  by-laws  for  the  payment  from  time  to  time  of  a  fixed  sum 
by  each  member,  to  be  paid  to  the  beneficiaries  of  deceased  members  in  such  amount 
and  manner  as  shall  be  fixed  by  said  by-laws  and  written  in  the  benefit  certificate 
issued  to  such  member,  and  payable  to  the  husband,  wife,  children,  relatives  of,  or 
persons  dependent  upon  such  member;  but  no  contract  under  this  Act  shall  be  valid 
or  legal  which  shall  be  conditional  upon  an  agreement  or  understanding  that  the 
beneficiary  shall  pay  the  dues  and  assessments,  or  either  of  them,  for  said  member. 

It  also  provides  that  Masonic  and  Odd  Fellows'  Associations  within  the  State  may 
employ  paid  agents  in  soliciting  business,  said  agents  to  be  licensed  by  the  Insurance 
Commissioner;  provides  that  such  corporation  may  hold  as  a  death  fund  an  amount 
not  exceeding  one  assessment ;  provides  that  the  fraternal  beneficiary  corporations, 
associations  or  societies,  organized  under  the  laws  of  another  State,  and  now  transact- 
ing business  as  herein  defined  in  this  State,  and  which  now  report,  or  which  shall 
report  when  requested,  to  the  Insurance  Department,  may  continue  such  business 
without  incorporating  under  this  Act.  Fraternal  beneficiary  corporations  or  societies, 
not  now  transacting  business  in  this  State,  which  may  hereafter  desire  to  do  so,  must 
first  obtain  a  license  therefor  from  the  Insurance  Commissioner,  and  shall  furnish 
him  a  copy  of  its  by-laws,  with  a  statement  showing  its  membership  and  financial 
condition,  and  such  other  information  as  he  deems  necessary.  It  requires  each 
society  or  association  to  report  annually  on  or  before  the  first  day  of  April  (March, 
in  Massachusetts)  to  the  Insurance  Commissioner  the  names  and  addresses  of  its 
President,  Secretary  and  Treasurer,  and  shall  make  such  further  statements  of  its 
membership  and  financial  transactions  for  the  year  ending  the  3ist  day  of  December, 
as  may  be  necessary,  for  the  proper  exhibit  of  its  business  and  standing;  provides 
for  the  punishment  of  any  person  who  assists  in  procuring  membership  in  any  society 
not  doing  business  as  authorized  in  this  Act.  It  is  provided  that  the  benefit  shall  not 
be  liable  to  trustee  or  garnishee  process,  and  shall  not  be  taken  or  appropriated  for 
any  debt  of  the  certificate  holder  or  beneficiary. 

The  general  insurance  statute  of  Maine,  regulating  business  and  assessment  in- 
surance associations,  provides  "that  nothing  herein  contained  shall  be  construed  as 
applicable  to  organizations  which  conduct  their  business  as  fraternal  societies  on  the 
lodge  system." 

The  New  York  law  defines  Fraternal  Orders  as  follows : 

First. — Section  6.  All  Beneficiary  Societies,  Orders  or  Associations,  whether  volun- 
tary or  incorporated  under  the  laws  of  this  State,  or  any  other  State  or  Territory 
of  the  United  States  or  of  the  District  of  Columbia,  the  members  of  which  are  com- 
posed, elected  and  initiated  in  subordinate  lodges  or  councils  or  other  bodies,  by 


24 

whatsoever  other  name  known,  according  to  the  constitution,  laws,  rules,  regulations, 
rites  and  ceremonies  of  such  societies,  orders  or  associations  respectively,  now  exist- 
ing in  this  State  or  which  may  be  hereafter  instituted  or  organized  in  this  State,  or 
authorized  to  do  business  in  this  State,  are  hereby  declared  to  be  mutual  benefit 
fraternities,  and  exempt  from  the  provisions  of  the  insurance  laws  of  this  State,  and 
shall  be  subject  only  to  the  provisions  of  this  Act. 

Second. — It  further  provides  that  any  number  of  persons,  not  less  than  nine  resi- 
dents of  the  State  of  New  York,  desiring  to  form  a  Fraternal  Beneficiary  Society, 
Order  or  Association  for  the  relief  of  members  or  beneficiaries,  shall  file  in  the  office 
of  the  Superintendent  of  the  Insurance  Department  a  declaration  signed  by  each  of 
the  corporators,  setting  forth  its  name,  mode  of  operation  and  names  of  officers, 
and  upon  certificate  of  the  Attorney  General,  that  the  law  has  been  complied  with, 
and  upon  the  Insurance  Commissioner  being  satisfied  that  there  are  200  subscribers 
whose  benefits  aggregate  $400,000,  and  that  one  assessment  amounting  to,  at  least, 
i  per  cent  thereof  Has  been  paid  in  full  in  cash,  then  he  shall  issue  his  certificate  and 
license  authorizing  the  society  to  transact  its  affairs. 

Third. — It  provides  for  the  reincorporation  of  orders  already  existing,  and  that 
no  foreign  corporation  shall  do  business  in  the  State  until  it  has  filed  the  certificate 
as  above,  and  the  Insurance  Commissioner  may  revoke  the  certificate  when  the  mem- 
bership falls  below  200  with  representing  benefits  aggregating  $400,000. 

Fourth. — The  Society  shall  have  power  to  make  its  own  Constitution  and  Laws, 
not  inconsistent  with  the  Constitution  and  Laws  of  New  York  State,  or  of  the  United 
States. 

Fifth. — Section  8.  Such  Fraternal  Beneficiary  Societies,  Orders  or  Associations, 
may  make  such  promise  or  agreement  with  their  members  for  the  payment  of  benefits 
to  a  member,  or  others  dependent  upon  him,  or  beneficiary  designated  by  him,  as 
may  be  provided  by  the  Constitution,  Laws,  Rules  and  Regulations  of  such  Fraternal 
Beneficiary  Societies,  Orders  or  Associations  respectively,  subject  to  a  compliance 
therewith  by  the  member,  provided  that  no  such  Fraternal  Beneficiary  Society,  Order 
or  Association  shall  issue  any  certificate  or  make  any  promise  or  agreement,  express 
or  implied,  for  the  payment  of  any  greater  sum  of  money  than  one  assessment  upon 
all  its  members  will  realize,  at  the  time  of  issuing  such  certificate  or  making  such 
promise  or  agreement. 

Sixth. — Section  9.  Such  Fraternal  Societies,  Orders  or  Associations  may  derive 
such  money  or  such  benefit,  charity,  relief  or  aid  fund  from  voluntary  donations,  or 
from  admission  fees,  dues  and  assessments  collected,  or  to  be  collected  from  mem- 
bers thereof,  in  manner  and  form  as  may  be  provided  by  the  Constitution,  Laws, 
Rules  and  Regulations  of  such  Societies,  Orders  or  Associations  respectively,  but  no 
such  Society  or  Officer  thereof  shall  use  any  money  collected  or  received  for  the 
payment  of  beneficiary  claims,  for  any  other  purpose. 

Seventh. — It  provides  also  that  all  such  Societies,  Orders  or  Associations,  together 
with  their  books,  papers  and  vouchers,  shall  be  subject  to  visitation  and  inspection 
by  the  Superintendent  of  the  Insurance  Deparemtnt,  or  such  person  or  persons  as  he 
may  at  any  time  designate.  Any  such  Society,  Order  or  Association  refusing  or  neglect- 
ing to  make  such  report  may,  upon  the  suit  of  said  Superintendent,  be  enjoined  by 
the  Supreme  Court  from  carrying  on  any  business  until  such  report  shall  be  made, 
and  until  the  costs'  of  such  action  be  paid.  Said  Superintendent  must,  within  thirty 
days  after  failure  to  make  such  report,  or  in  case  any  such  Society,  Order  or  Asso- 
ciation shall  exceed  its  powers  or  shall  conduct  its  business  fraudulently,  or  to  com- 
ply with  any  of  the  provisions  of  this  Act,  give  notice  in  writing  to _ the  Attorney- 
General,  who  must  immediately  commence  an  action  against  the  Society  so  failing. 
The  annual  report  to  the  Superintendent  of  Insurance  shall  be  in  lieu  of  all  other 
reports  required  by  any  other  law. 

Eighth. — Each  notice  of  assessment  shall  set  forth  truly  the  purpose  of  such 
assessment,  and  what  portion  or  amount  thereof,  if  any,  is  to  be  used  for  the  pay- 
ment of  other  than  beneficiary  claims. 

Ninth. — Benefits  shall  not  be  subject  to  garnishment. 


Tenth. — Any  officer,  member,  agent,  solicitor  or  examining  physician  of  said 
:iety,  or  any  other  person  who  shall  knowingly  or  willfully  make  any  false  or 
fraudulent  statement  _or  representation  in  or  with  reference  to  any  documentary  or 
other  proof  for  the  purpose  of  obtaining  membership  in  or  benefit  from  any  such 
Society,  Order  or  Association,  for  himself  or  any  other  person,  shall  be  guilty  of  a 
misdemeanor. 

Eleventh. — Existing  Fraternal  Societies  are  made  subject  to  the  provisions  of  this 
Act,  except  in  its  provisions  for  incorporation  and  the  filing  of  the  certificate,  as  a 

rdition  precedent  to  beginning  operation. 
Twelfth. — Nothing  in   this   Act   shall  be  construed   to  apply  to  any  Corporation, 
Society  or  Association  carrying  on  the  business  of  life,  health,  casualty  or  accident  in- 
surance for  the  profit  or  gain,  and  shall  only  apply  to  Fraternal  Beneficiary  Societies, 
Orders  or  Associations,  as  defined  by  Section  6. 

Thirteenth. — Independent  Order  of  Odd  Fellows,  Free  and  Accepted  Masons  and 
Knights  of  Pythias,  exculsive  of  the  endowment  rank,  excepted. 

The  Law  of  Wisconsin,  as  approved  April  9,  1889,  requires  a  report  similar  to 
that  of  Massachusetts,  to  be  made,  and  provides  for  the  appointment  of  the  Insurance 
Commissioner  as  attorney,  upon  whom  process  against  the  corporations  shall  be 
served.  In  other  respects  the  Fraternal  Societies  are  not  subject  to  insurance  legis- 
lation. 

The  Nebraska  statute  provides : 

Any  secret  society  or  association,  the  management  and  control  of  which  is  con- 
fined to  the  membership  of  any  secret  society  or  order,  heretofore  organized,  or 
which  may  hereafter  be  organized,  which  in  addition  to  the  benevolent  and  fraternal 
features  thereof,  shall  also  issue  certificates  of  indemnity  calling  for  the  payment  of  a 
certain  sum,  known  and  defined,  in  case  of  the  death,  disability  or  sickness  of  any  of 
its  members,  to  the  wife,  widow,  orphan  or  orphans,  or  other  person  dependent 
upon  such  members,  shall  be  exempt  from  the  provisions  of  the  law  relating  to  life 
insurance  companies.  Provided,  that  such  secret  society  or  association  as  aforesaid 
shall  comply  with  all  the  requirements  of  this  Act. 

Within  thirty  days  after  the  taking  effect  of  this  Act  such  society  as  aforesaid 
shall,  by  its  presiding  officer  or  recording  officer,  or  both  of  them,  file  a  certificate  in 
the  office  of  the  Auditor  of  Public  Accounts,  setting  forth  the  total  number  of  mem- 
bers in  good  standing  in  such  Society  or  Association  at  the  date  of  the  taking  effect 
of  this  Act,  the  name,  title  and  postoffice  address  of  each  of  the  chief  officers  of  such 
Societies  or  Associations,  the  plan  of  assessments  upon  which  funds  are  provided  to 
pay  the  certificate  of  indemnity  issued  by  such  Society  or  Association,  together  with 
a  certified  copy  of  the  constitution  and  by-laws  of  such  Society.  If,  from  such  state- 
ments, the  Auditor  of  Public  Accounts  shall  be  satisfied  that  such  Society  or  Associa- 
tion has  a  sufficient  membership  to  pay  a  certificate  so  issued  by  such  Society  or 
Association  in  case  of  the  death  of  any  of  its  members  by  its  usual  method  of  assess- 
ment, he  shall  issue  to  such  Society  or  Association  a  certificate  authorizing  it  to 
tranact  its  business  for  one  year. 

It  then  provides  for  annual  reports,  which  requirement  is  repealed  by  the  Act  of 
1889.  It  further  enacts  that  if  at  any  time  the  Auditor  shall  be  credibly  informed 
that  the  membership  has  fallen  below  the  number  sufficient  to  pay  the  indemnity,  he 
shall  investigate  the  matter,  and,  if  proven,  shall  withdraw  the  certificate. 

Before  any  change  in  the  constitution  and  by-laws  of  any  such  society  or  corpora- 
tion shall  take  effect,  a  copy  of  the  same  shall  be  filed  in  the  office  of  the  Auditor  of 
Public  Accounts. 

Money  collected  for  the  payment  of  certificates  of  indemnity  shall  be  used  for  no 
other  purpose. 

Any  person  or  persons  violating  the  provisions  of  this  Act  shall,  upon  conviction 
thereof,  be  imprisoned  in  the  penitentiary  for  not  more  than  five  nor  less  than  one 
year. 

Any  officer  embezzling  or  appropriating  any  of  the  funds  of  any  such  Society  to 
his  own  use  shall  he  guilty  of  embezzlement,  and  upon  conviction  thereof  be  punished 
accordingly. 


26 

The  Committee  on  Legislation,  in  its  report  to  the  National  Fraternal  Congress, 
referring  to  the  Nebraska  and  Massachusetts  statutes,  used  the  following  strong  lan- 
guage : 

This  (Nebraska  law)  is  the  most  iniquitous  Act  upon  the  statute  book.  The  re- 
quirement that  the  certificate  must  be  filed  within  thirty  days  after  the  passage  of  the 
Act  is  evidently  intended  to  ensnare  the  Orders  who  in  that  brief  period  may  never 
have  heard  of  the  law,  and  it  practically  excludes  all  new  organizations  from  doing 
business  in  the  State. 

The  proviso  that  the  changes  in  the  laws  shall  not  take  effect  until  a  copy  has 
been  filed  in  the  Auditor's  office  is  the  sublimity  of  impudence,  of  arbitrariness  and 
injustice. 

Attention  is  especially  called  to  this  law  that  its  provisions  may  be  modified  in  the 
interest  of  fairness,  and  if  the  Insurance  Department  of  the  State  is  responsible  for 
its  enactment,  that  department  should  at  once  be  attacked  by  the  Fraternal  Orders, 
as  partisan  and  tyrannical. 

The  law  of  Massachusetts  gives  too  much  power  to  one  man.  It  practically  ex- 
cludes all  new  orders  from  entering  the  State,  and  in  this  nineteenth  century  has 
built  a  Chinese  wall  around  the  old  Commonwealth,  and  secure  behind  it,  as  he  thinks, 
the  Insurance  Commissioner,  interpreting  the  law,  says  the  words  ''report  when  re- 
quested," mean  that  if  I  do  not  request  them  they  cannot  "report  when  requested," 
and  cannot  come  in  under  the  law.  That  is  to  say,  that  the  status  of  every  Fraternal 
Order  in  the  State  of  Massachusetts  depends  upon  the  judgment  and  whim  of  the 
Insurance  Commissioner,  uncontrolled  by,  or  rather  supported  by  law,  whether  he  will 
ask  it  to  report  or  not.  This  extraordinary  interpretation  should  be  looked  into  and 
an  adverse  decision  had  or  the  law  repealed.  No  presumed  benefit  can  justify  the 
conference  of  such  power  on  any  man  in  these  days. 

The  committee,  answering  the  question,  Is  Legislation  Needed?  delivered  itself 
as  follows : 

An  analysis  of  the  special  laws  relating  to  the  Fraternal  Societies,  which  are  on 
the  statute  books,  show  us: 

That  in  Nebraska  the  intention  of  the  legislation  was  plainly  to  cripple  and  drive 
the  Fraternal  Orders  from  the  State. 

The  Missouri  law  simply  relates  to  the  annual  reports,  while  the  laws  of  Massa- 
chusetts, Maine  and  New  York  include  this  feature,  and  declare  the  mode  of  incor- 
poration, with  some  limitations  intended  to  provide  for  the  protection  of  members. 
The  distinction  between  the  Fraternal  Orders  and  the  mutual  assessment  companies 
is  maintained  in  these  statutes,  and  this  is  right,  but  beyond  the  provisions  for  their 
incorporation,  based  upon  their  essential  and  distinctive  features  and  principles,  it  is 
questionable  whether  the  other  provision  of  those  Acts  are  of  any  practical  utility. 

What  are  these  provisions  intended  to  protect  the  membership? 

First.— Annual  report,  Massachusetts,  New  York,  Maine  and  Wisconsin  law. 

Second. — Any  solicitor,  agent  or  examining  physician,  knowing  or  willfully  making 
any  false  or  fraudulent  statement  or  representation,  in  or  with  reference  to  any  appli- 
cation for  membership,  or  for  the  purpose  of  obtaining  any  money  or  benefit  in  any 
corporation,  etc.,  shall  be  guilty  of  a  misdemeanor  (Maine,  Massachusetts  and  New 
York  laws).  And  making  it  perjury  for  any  person  to  make  a  false  statement  of  a 
material  fact  under  oath  in  death  proofs.  (Massachusetts  law.) 

Third. — No  Society  shall  promise  to  pay  more  than  one  assessment  will  yield. 
(New  York  law.) 

Fourth.— The  assessment  notice  shall  state  specifically  its  object  and  what  propor- 
tion is  to  be  used  for  other  than  beneficiary  claims.  (New  York  law.) 

Fifth.— Defining  what  constitute  beneficiary  societies.  (New  York,  Maine  and 
Massachusetts  law.) 

Sixth.— Declaring  misappropriation  of  funds  embezzlement.      (Nebraska  law.) 
Seventh.— Funds   not   subject   to  garnishment. 


27 

The  provision  in  relation  to  embezzlement  is  believed  to  be  covered  by  the  crimi- 
nal law  of  all  the  States. 

The  especial  features  of  this  legislation  are  prompted  by  what  might  occur  rather 
than  what  the  experience  of  the  Orders  necessitates,  but  they  are  not  in  any  way  de- 
pendent upon  the  supervision  by  the  Insurance  Departments,  which  is  ingeniously  in- 
troduced into  the  Acts.  Some  of  them,  notably  that  relating  to  garnishment,  were 
included  in  the  old  statutes,  and  it  is  believed  that  this  provision  is  the  only  one  that 
has  been  of  any  practical  benefit. 

The  losses  of  the  Orders  from  the  offenses  described  as  constituting  misdemeanor 
and  perjury  are  hardly  worthy  of  mention,  and  are  largely  and  best  provided  for  by 
the  vigilance  and  activity  of  the  members. 

That  a  Society  shall  pay  more  than  one  assessment  will  yield  seems  rather  a 
matter  for  the  members  than  for  the  paternal  (sic)  Commonwealth. 

The  assessment  notices,  so  far  as  we  are  aware,  specify  distinctly  the  object  of  the 
call. 

The  definition  of  a  Fraternal  Order  is  an  important  one,  and  the  distinction 
between  them  and  Life  Insurance  Companies  of  any  description  should  be  fully  set 
forth  in  all  legislation  likely  to  affect  them. 

It  is  a  very  remarkable  fact  that  all  the  legislation  on  the  statute  books  relating  to 
the  Fraternal  Societies  originated  with  the  Life  Insurance  Companies,  or  with  the 
Insurance  Departments  of  the  States.  It  has  not  come  from  the  members  of  the 
Orders  or  their  officers.  It  is  true  that  some  officers  of  the  Fraternal  Societies, 
thinking  that  an  annual  report  could  do  no  harm  and  might  do  good  in  showing  the 
condition  of  the  several  Orders  at  the  time  it  is  made,  did  not  seriously  object  thereto, 
but  the  necessity  or  right  of  State  supervision  of  the  Fraternal  Orders,  it  is  believed, 
has  not  been  admitted  by  any  one  authorized  to  speak  for  them. 

The  reason  for  this  is  obvious.  A  life  Insurance  Company  is  a  close  corporation. 
Its  insured  can  have  no  knowledge  of  its  affairs  except  as  it  chooses  to  exhibit  them. 
A  Fraternal  Order  has  an  argus  eye  in  each  of  its  members,  prying  into  its  affairs. 
Each  one  is  an  integral  part  of  the  whole,  and  its  workings  in  all  their  details  are 
exhibited  in  the  council  room,  in  the  Grand  and  in  the  Supreme  Councils,  to  a  body 
jealous  of  its  prerogatives  and  too  large  to  enter  into  any  combinaticn  for  wrong- 
doing. 

In  all  the  machinery  necessary  to  protect  members  against  fraudulent  applica- 
tions, death  claims  and  misappropriations  of  funds,  the  customary  provisions  of  the 
constitutions  and  laws  of  the  Orders  have  proved  sufficient,  backed  as  they  are  by  the 
ordinary  criminal  laws  in  the  several  States. 

The  submission  of  the  Fraternal  Orders  to  the  control  of  the  Insurance  Depart- 
ment of  any  of  the  States  is  wrong  in  principle,  and  of  no  benefit  to  the  members  of 
the  Orders  in  practice.  The  reports  are  buried  and  are  of  as  much  general  use 
as  the  census  statistics,  while  the  annual  reports  of  the  Supreme  authorities  of  the 
Orders  are  published  for  general  inspection,  and  can  be  obtained,  if  necessary,  by 
any  one. 

The  assessment  notice  is  the  warning  voice  to  the  member,  bidding  him  to  inquire 
into  the  Society's  affairs,  and  it  is  the  only  notice  that  the  member  ever  heeds. 

It  is  wrong  in  principle,  because  the  distinction  is  marked  and  wide  between 
the  Fraternal  Orders  and  the  Insurance  Companies  of  all  kinds.  The  one  is  organ- 
ized with  a  view  to  business  profit  solely.  The  other  is  constituted  for  benevolent  pur- 
poses, with  the  death  benefit  as  an  incident  to  its  benevolent  features.  The  whole 
motive  of  operation  and  the  objects  of  the  Insurance  Companies  are  widely  divergent 
from  the  Fraternal  Orders.  And  with  this  marked  distinction,  it  is  a  wrong  upon 
them  to  break  down  this  barrier,  and  subject  them  to  the  control  of  a  department, 
organized  from  an  insurance  standpoint  and  in  every  case  where  special  legislation  has 
been  had,  may  be  depended  upon  to  look  at  affairs  through  insurance  spectacles. 

The  Orders  today  are  as  honestly  conducted  in  the  States  where  they  are  exempt 
from  any  control  as  in  those  States  where  the  insurance  authorities  have  assumed 
to  superintend  them.  The  long  array  of  those  States  shows  that  there  is  no  neces- 
sity for  special  legislation.  The  constitutions  of  the  Orders,  and  the  vigilance  of  the 
membership  with  the  ordinary  criminal  statutes  relating  to  frauds  and  misdemeanors, 
have  proved  a  sufficient  protection.  And  the  very  few  instances  where  offenses  have 
occurred  have  found  the  remedy  ready  and  sufficient  and  do  not  justify  the  sub- 
jection of  the  Fraternal  Orders  to  the  alien  institution  of  the  Insurance  Department. 
These  remarks  are  only  intended  to  include  the  legislation  promoted  by  those  In- 


28 

surance  Commissioners  who  have  sought  to  aggrandize  their  offices  at  the  expense 
of  the  Fraternal  Orders,  and  do  not  include  the  honorable  and  intelligent  officials 
who  appreciate  the  Fraternal  Orders,  and  the  distinction  between  them  and  the  money- 
making  corporations,  and  who  recognize  the  fact  that  they  are  not  intelligently  sub- 
ject to  their  departments. 

Your  committee  are  therefore  of  the  opinion  that  no  legislation  subjecting  the 
Fraternal  Orders  to  State  control  in  any  may  should  be  permitted  to  be  enacted.  In 
cases  where  legislation  has  already  been  had,  it  should  be  repealed,  or  a  new  depart- 
ment, to  be  called  the  "Department  of  the  Fraternal  Orders,"  should  be  created  and 
substituted  for  the  Insurance  Department.  And  the  law  should  provide  that  the 
incumbent  of  said  office  shall  be  a  member  of  one  of  the  Fraternal  Orders.  No  man 
who  is  not  a  member  of  the  Benevolent  Societies  can  comprehend,,  do  justice  to,  or 
should  in  any  manner  be  permitted  to  control  the  economy  of  these  institutions.  That 
in  all  legislation  relating  to  Insurance  Companies,  which  by  plain  expression  or  by 
ingenious  and  subtle  wording,  might  affect  such  Orders,  a  clause  should  be  added 
expressly  excluding  them  from  its  operation.  That  the  experience  of  the  large  ma- 
jority of  the  States  shows  that  no  legislation  is  necessary  to  protect  the  members 
of  the  Orders  from  their  management,  but  that  everywhere  the  .most  intelligent  and 
active  interest  is  necessary  to  protect  the  Orders  from  legislation  promoted  by  the 
Insurance  Companies. 

Whenever  in  any  State  it  is  advisable  to  have  a  special  law  for  the  incorpora- 
tion of  the  Fraternal  Orders,  your  Committee  believe  that  the  New  York  law  is  less 
liable  to  objection  than  the  others,  omitting  Section  10,  which  relates  to  Supervision 
by  the  Insurance  Deparament ;  amending  Sections  2,  3  and  4,  so  that  the  application 
for  charter  or  re-incorporation  shall  not  be  made  to  the  Insurance  Department,  but 
the  certificate  shall  be  filed  and  the  license  or  charter  issued,  as  is  provided  for  cor- 
porations, under  the  general  Incorporation  Law  of  the  respective  States ;  and  that 
the  certificate  of  foreign  corporations,  provided  for  in  Section  5,  shall  be  filed  with 
the  Secretary  of  State,  who  shall  be  substituted  for  the  Insurance  Department,  or 
Superintendent  of  Insurance  Department,  in  said  section. 

Your  Committee  therefore  recommend  the  adoption  of  the  following  resolutions : 

Resolved,  i.  That  the  Fraternal  Societies  be  exempted  from  the  provisions  of  all 
laws  relating  to  insurance  companies,  regular  or  cooperative. 

Resolved,  2.  That  no  legislation  is  needed,  unless  possibly  in  some  isolated  cases, 
where  experience  has  shown  it  is  advisable  to  protect  the  fraternal  beneficial  orders 
from  Societies  not  properly  fraternal,  in  States  where  the  distinction  is  not  drawn  by 
present  legisation ;  and  this  can  best  be  done  by  a  simple  clause  of  exemption. 

Resolved,  3.  If  deemed  advisable,  under  peculiar  circumstances,  in  certain  States, 
the  New  York  law  should  be  used ;  so  amended  that  the  certificate  should  be  filed  and 
the  charter  or  license  issued  in  the  manner  provided  in  the  general  Incorporation 
Laws  of  the  several  States;  that  no  report  shall  be  made  to  the  Insurance  Com- 
missioner, but  that  a  new  department,  to  be  called  the  Department  of  the  Fraternal 
Orders,  shall  be  created  in  every  State  where  supervision  or  control  of  the  Fraternal 
Orders  shall  for  any  cause  be  permitted. 

The  report  of  the  Committee  was  unanimously  adopted  and  its  resolutions  sup- 
ported without  dissent.  The  members  of  the  Committee  were  leaders  and  the  dele- 
gates to  the  Congress  were  the  officials — and  many  of  them  the  founders — of  the  most 
important  Societies  in  the  United  States  and  Canada.  Amongst  them  were  Boynton, 
Sackett,  Nelson,  Miller,  Harvey,  Craig,  Hall,  Stevens,  Savage,  Warnock,  Shedd,  Acker, 
Shepherd,  Irving,  Brown,  Robson,  Wright,  Seaver,  Shields  and  Pratt;  while  on  the 
Committee  on  Legislation  were  John  Haskell  Butler,  W.  Warne  Wilson,  John  Mulli- 
gan, S.  A.  Will,  John  Otto,  John  T.  Milburn  and  M.  G.  Jeffries. 

Should  not  such  men  be  held  as  true  interpreters  of  the  purpose  and  character  of 
Fraternal  Beneficiary  Societies? 

We  have  these  men  standing  as  a  solid  body  against  legislative  regulation  and 
departmental  supervision,  and,  excepting  five  States,  their  view  is  accepted  (in  1890) 
by  State  Legislatures  and  Insurance  Commissioners.  The  previous  effort  to  secure 


29 

a  modicum  of  legislative  control  in  Missouri  had  been  "foiled"  by  Court  interpretation 
and  decision. 

We  have  these  men,  twenty  years  after  the  A.  O.  U.  W.  began  business,  unanimously 
declaring  that  the  Fraternal  Beneficiary  Societies  "are  constituted  for  benevolent 
purposes,  with  the  death  benefit  as  an  incident  to  its  benevolent  features.'' 

We  hear  them  declaring  that  "no  legislation  subjecting  the  Fraternal  Orders  to 
State  control,  iir  any  way,  should  be  permitted"  unless  in  "isolated  cases,"  and  then 
"this  can  best  be  done  by  a  simple  clause  of  exemption." 

Commissioner  Wilson,  of  the  Internal  Revenue  Department,  and  Justices  of  the 
Supreme  Courts  of  Pennsylvania,  Missouri  and  Illinois  had  good  authority  to  support 
their  rulings !  Protesting  members  can  quote  the  fathers  to  sustain  their  conten- 
tions ! 

This  history  should  reflect  the  spirit  of  the  times  as  it  progresses,  and  to  that  end 
I  quote  from  the  address  of  President  A.  R.  Savage,  at  the  fifth  annual  session  of 
the  Congress,  held  in  Washington,  D.  C.,  November  10,  1891 : 

I  do  not  know  that  history  records  any  instance  of  so  marvelous  a  development  of 
a  charitable,  or  human,  or  social  principle,  so  far-reaching  in  its  effects,  as  that  em- 
bodied in  the  constitutions  of  the  Fraternal  Orders.  Citizens  divided  in  interests, 
separated  by  locality,  of  every  tenet  in  religion,  and  every  shade  of  political  convic- 
tion, unknown  to  each  other  when  enlisted  under  the  white  banner  of  charity,  and 
drawn  to  each  other  by  the  bonds  of  fraternity,  become  brothers  in  spirit  and  in  deed, 
giving  of  their  substance,  as  well  as  of  their  sympathy,  to  those  upon  whom  want  has 
fallen,  and  upon  whose  pathway  the  shadow  of  misfortune  is  resting. 

We  began  in  darkenss,  but  evermore  our  paths  have  been  tending  toward  the 
light.  We  began  in  ignorance ;  we  have  learned  wisdom  by  sharp  and  profitable  expe- 
rience. We  had  no  place  either  upon  statute  book  or  in  the  decisions  of  the  courts. 
No  more  had  we  any  recognized  position  among  the  varied  social  forces  which  sur- 
round and  control  mankind.  Courts  looked  upon  us  with  disparagement;  Legislatures 
with  suspicion,  and  society,  as  the  latest  Utopian  experiment  devised  by  idealists,  per- 
chance to  live,  and  living  to  die,  marking  one  more  of  the  failures  of  enthusiastic  and 
unwise  men  whose  hearts  felt  more  grandly  than  their  eyes  were  permitted  to  see 
wisely.  But  by  patience  and  intelligence,  and  steadfastly  continuing  in  good  works, 
all  this  has  been  changed. 

Today,  after  a  little  more  than  twenty-five  years,  at  least  one  in  forty  of  all  the 
population  of  our  country,  including  men,  women  and  children,  are  members  of  some 
one  or  more  of  these  societies,  and  at  least  one  in  ten  are  their  beneficiaries.  Should 
one  ask  me  whether  such  a  plan,  built  upon  such  a  foundation,  was  liable  to  endure, 
my  first  answer  would  be,  "nothing  in  this  generation  can  fail  which  meets  so  per- 
fectly the  common  wants  of  a  common  people."  This  is  not  the  time  for  a  discussion 
of  the  theory  of  fratenal  beneficence.  That  we  have  assembled  here  in  this  Con- 
gress is  the  evidence  and  proof  of  our  convictions.  Before  us  is  the  problem,  "How 
may  we  best  improve,  amend  and  modify  the  details  of  our  work  and  put  into  prac- 
tical shape  and  operation,  the  lessons  learned  in  the  school  of  experience?"  Each  year 
brings  new  lessons  by  which  we  may  profit.  We  are  just  beginning  to  turn  the  light 
of  philosophy  upon  our  plans,  and  to  tabulate,  to  analyze  and  compare.  Vital  sta- 
tistics are  gradually  becoming  more  and  more  important  to  us,  and  we  are  learning 
to  rely  less  upon  wild,  impetuous,  unregulated  impulse,  either  for  sustaining  existence 
or  promoting  growth,  and  more  upon  mthodic  philosophical  and  wisely  directed  efforts. 

We  come  into  sharp  competition  with  the  "old  line"  insurance  companies.  We 
come  into  competition  with  the  open  assessment  associations,  which  have  taken  in  part 
our  form,  but  have  left  our  substance.  We  come  into  competition  with  Orders  which 
claim  to  be  allied  to  us,  but  have  neither  our  form  nor  our  substance.  But  our  field 
is  peculiarly  our  own.  never  to  be  successfully  invaded  by  any  competitor,  so  long  as 
the  warfare  we  wage  is  only  for  the  widow  and  the  orphan,  and  not  to  promote  selfish, 
temporal  interests.  Let  benevolence,  and  not  gain,  be  our  cornerstone,  and  our  build- 
ing shall  stand  immortal,  eternal.  I  believe  we  can  in  no  way  so  well  do  ourselves 
and  our  Societies  the  most  good,  as  by  declaring  in  the  most  emphatic  manner  our 
belief  in  the  old  "land  marks."  Let  us  stand  steadfast  where  this  Congress  has  always 


30 

stood,  extending  the  right  hand  of  fellowship  to  those  who  build  upon  such  foundation 
as  we  have  built  upon.  The  most  exalted  form  of  fraternal  benevolence  is  that  exem- 
plified by  men  who  gather  round  a  common  altar  and  take  upon  themselves  a  sacred 
vow  to  be  faithful  unto  death  to  the  loved  ones,  to  care  for  the  widow,  to  lift  up  the 
orphan,  and  relieve  the  sick  and  the  distressed,  and  never  to  make  even  the  form  of 
fraternity  a  pretense  for  personal  gain. 

I  also  congratulate  you  upon  the  fact  that,  after  these  many  years,  merit  and  not 
cheapness  is  becoming  the  criterion  of  excellence  by  w'hich  Fraternal  Societies  are 
judged. 

I  think  this  Congress  should  adopt  some  more  systematic  and  efficient  method  of 
making  its  influence  felt  in  legislative  halls,  when  legislation,  either  favorable  or  ad- 
verse, is  under  consideration.  Notably,  in  two  or  three  States  this  last  year,  dangerous, 
if  not  hostile,  laws  have  been  enacted  which  might  have  been  defeated  by  concerted 
action.  We  cannot  be  too  vigilant.  There  should  be  a  sentinel  upon  every  outpost, 
and  the  entire  army,  when  it  sleeps,  should  sleep  upon  its  arms. 

Surely  the  voice  of  a  million  and  a  half  of  men  and  women,  uttered  with  force 
and  authority,  cannot  fail  to  be  heard  and  heeded  by  the  most  obdurate  of  legislators. 

It  was  noted  that  the  Massachusetts  law  permitted  the  payment  of  endowments  by 
Fraternal  Societies.  In  1891  began  the  agitation  that  resulted  in  the  elimination  of 
such  permission  from  the  laws  of  all  the  States,  excepting  the  payment  of  a  stated 
sum  as  an  old-age  benefit  at  age  70.  I  quote  from  the  proceedings  of  the  Congress: 

The  President:  There  being  no  reports  of  committees  ready  to  be  presented  at 
the  present  time,  the  Congress  will  take  up  the  next  matter  on  the  program,  to-wit : 
Subject  No.  8,  discussion  of  subject,  "Can  a  Fraternal  Society  safely  transact  an  en- 
dowment business  and  pay  a  stated  sum  at  the  end  of  a  stated  number  of  years, 
or  sooner  in  the  event  of  death?"  Upon  that  subject  James  E.  Shepherd  has  pre- 
pared a  paper  which  the  Congress  will  not  listen  to:  (The  concluding  paragraphs  ar? 
given.) 

Now,  what  did  the  founders  of  the  Fraternal  Orders  start  out  to  do — merely  this 
and  nothing  more: 

To  protect  the  widow  and  the  orphan.  In  fact,  today  the  benefit  fund  of  one  of 
the  oldest  and  largest  Orders  is  officially  known  as  the  "Widows  and  Orphans'  Benefit 
Fund."  Then  no  man  sought  any  direct  personal  gain,  and  the  proof  of  this  is  that 
in  many  of  the  older  Orders  only  men  were  admitted  to  membership,  and  I  call  to 
mind  but  one  Order,  organized  as  far  back  as  1876,  that  admitted  women  to  mem- 
bership. By  thus  shutting  out  the  wife  from  membership,  he  practically  could  be 
the  beneficiary  of  no  one — his  action  was  free  from  all  else  than  protection  to  those 
dependent  on  him;  it  was  utterly  without  selfishness,  and  justly  and  fairly  stated  he 
was  one  of  a  brotherhood  that  formed  and  established  a  fraternity  so  beneficent,  un- 
selfish and  single-minded,  that  it  was  a  practical  embodiment  and  application  of  the 
theory  of  the  golden  rule. 

So  patent  was  this  to  the  honest  observer  that  from  very  general  distrust  and  un- 
belief came  a  change  to  almost  universal  commendation.  Hon.  John  K.  Tarbox,  in 
1887,  in  his  annual  report  to  the  General  Court  of  Massachusetts,  speaking  of  these 
Societies,  officially  endorsed  them,  saying:  "The  fit  word  is  one  of  cordial  commen- 
dation, aside  from  the  gracious  benefits  they  disburse  through  their  insurance  plan ; 
they  unite  the  people  in  sympathetic  association  and  foster  a  worthy  social  spirit." 

Under  no  other  plan  could  these  Orders  have  won  the  place  they  hold  in  the  world's 
regard.  Under  it  came  their  phenomenal  growth  and  consequent  ability  to  do  an 
unmeasured  and  almost  unmeasurable  good. 

And  now,  having  briefly  set  forth  the  plan  of  each,  I  submit  my  conclusions : 

A  Fraternal  Order  cannot  safely  sell  endowments,  because — 

First. — The  plans  of  the  Fraternal  Orders  and  a  company  selling  endowments  are 
dissimilar  and  irreconcilable. 

Second. — An  endowment  is  purely  banking  and  not  insurance  of  any  kind. 

Third. — Speculation  enters  into  endowments.  It  is  foreign  to,  and  would  be  fatal 
to,  the  fraternal  plan. 

Fourth. — Fraternal  assessment  insurance  is  still  in  its  experimental  stage,  and  there 
is  danger  and  unwisdom  in  adding  any  foreign  matter  until  time  shall  fully  develop 


31   t 

the  proper  course  to  remedy  and  permanently  overcome  the   undesirable  things  that 
each  year  develops  to  him  who  does  not  shut  his  eyes  to  the  disagreeable. 

D.  E.  Stevens  also  presented  a  paper  on  subject  Xo.  8,  and  following  are  ex- 
cerpts : 

Can  a  Fraternal  Society  safely  transact  an  endowment  business,  and  pay  a  stated 
sum  at  the  end  of  a  stated  number  of  years,  or  sooner  in  the  event  of  death? 

Life  insurance  is  indemnity  against  financial  loss  by  death,  and  should  be  based 
upon  the  present  or  prospective  productiveness  of  the  person  insured. 

Endowment  Insurance  is  Term  Insurance  combined  with  a  compound  interest  in- 
vestment. 

Tabor,  in  his  "Three  Systems,"  says :  "A  healthy  body,  a  strong  will,  an  active 
brain,  and  a  natural  aptness  for  business,  are  the  most  productive  property  in  the 
world.  It  has  been  said  that  when  time  was  young,  only  two  human  beings  lived 
on  this  earth.  They  lived  in  a  garden,  and  rig  leaves  were  their  clothing.  There 
were  no  business  blocks,  no  railroads,  no  banks,  no  palatial  residences,  no  trade,  no 
commerce,  no  money,  no  art,  no  science,  no  culture,  no  material  wealth.  All  of  these 
have  since  been  produced  by  the  brain  of  man.  One  generation  after  another  has 
lived  and  passed  away,  each  contributing  something  to  what  now  constitutes  the 
wealth  of  the  world !  One  hundred  years  hence  every  man,  woman  and  child  now 
living  will  be  dead.  The  exceptions  only  prove  the  rule.  Man,  truly,  is  very  produc- 
tive, and  there  is  nothing  more  certain  than  that  he  will  die." 

While  under  the  former  conditions  there  was  no  such  thing  as  Life  Insurance, 
nor  need  of  it,  yet  one  can  readily  see  how  the  present  condition  of  things  makes 
necessary  Life  Insurance. 

Endowment  Insurance  differs  quite  widely  from  Life  Insurance  in  many  respects. 
If  we  take  it  for  granted  that  the  question  means,  is  it  safe  from  a  financial  or  mathe- 
matical standpoint  for  such  a  Society  to  transact  an  endowment  business,  if  the  Society 
be  building  and  equipped  with  the  necessary  machinery  needful  thereto,  we  answer, 
Yes. 

In  answering  the  first  phase  of  this  question  in  the  affirmative,  I  could  do  so  only 
upon  condition  that  with  the  seeming  mystery  the  explanation  also  go.  I  think  there 
can  be  no  question  as  to  there  being  a  safe  method  of  conducting  an  Endowment 
business.  It  may  be  expensive,  but  it  can  be  made  safe,  provided  the  funds  are  honestly 
held  and  faithfully  invested  by  those  having  them  in  charge. 

To  say  that  as  the  end  of  the  term  of  years  in  which  the  first  Endowments  are  to 
mature  draws  near,  that  by  the  extra  heavy  sums  which  will  be  required,  a  large 
number  of  the  members  will  be  compelled  to  lapse  their  membership,  thus  swelling  the 
profits  of  those  who  remain,  is  a  proposition  so  uncertain  and  so  at  variance  with 
equity,  business  prudence  and  the  milk  of  human  kindness,  that  I  can  scarcely  think 
that  any  organization  would  found  calculations  thereon,  much  less  seriously  consider 
them  safe. 

Now,  without  wearying  your  patience  by  going  into  a  calculation  in  further  detail, 
I  submit  that  such  a  proposition  is  not  (in  my  judgment)  a  safe  one,  unless  some 
alchemist  or  magician  is  called  upon  to  assist  in  the  attainment  of  the  promised  end. 

As  many  of  these  so-called  Societies  pay  a  mere  pittance  at  death  of  a  member 
who  dies  before  the  end  of  the  Endowment  term,  their  business  would  more  properly 
be  called  Tontine  Insurance. 

Now,  there  are  longer  term  endowments,  which  present  something  more  practical, 
but  which,  of  course,  must  include  a  fund  sufficient,  with  accretions  from  interests  and 
profit  from  lapsing,  to  amount  to  the  face  of  the  certificate  by  the  end  of  the  endowment 
period.  The  advantage  gained  in  a  longer  term  comes  from  the  fact  that  these  factors 
have  a  so  much  wider  field  in  which  to  operate,  and  therefore  come  to  the  assistance 
of  the  member  in  a  much  greater  degree  than  is  possible  under  the  short  term  method. 
To  fix  the  endowment  period  at  or  about  the  end  of  probable  life  is  the  most  favorable 
plan  possible  for  anything  of  an  endowment  nature,  for  thus,  only  the  veterans  who 
have  faithfully  and  loyally  stood  by  the  organization  reap  a  reward,  and  themselves, 
in  old  age,  reap  it  instead  of  further  on,  having  others  benefit  by  receiving  it.  In  even 
this  class  of  endowment  it  must  be  remembered  in  the  calculation,  and  we  must  not 
lose  sight  of  the  fact  that  they  are  going  to  cost  more  than  life  insurance  payments, 
and  should,  therefore,  be  charged  at  a  different  rate. 


32 

Now,  turning  from  this  phase  of  the  question  to  that  other  phase  of  it,  which  I 
cannot  feel  justified  in  ignoring  in  this  paper,  namely:  Can  a  Fraternal  Society  safely 
conduct  an  endowment  business,  I  am  clearly  of  the  opinion  that  the  Fraternal  Organi- 
zation which  would  keep  in  spirit  and  in  letter  the  meaning  of  the  word  "Fraternal" 
in  its  best  sense,  cannot  safely  or  otherwise  conduct  an  endowment  business,  in  the 
usual  acceptance  of  that  term.  The  word  "Fraternity"  is  derived  from  "Frater," 
brother,  and  the  word  "Fraternity"  is  defined  as  a  body  of  men  associated  for  their 
common  interest,  business  or  pleasure — a  brotherhood.  Hence,  where  the  interest  of 
each  lies  in  the  misfortune  of  the  other,  or  his  benefits  are  to  be  derived  from  the 
failure  of  his  brother  in  his  efforts  to  do  his  share,  there  seems  to  be  something  an- 
tagonistic to  the  true  spirit  of  fraternity. 

On  this  subject  discussion  occurred  as  follows: 

J.  A.  Hmsey: 

I  do  not  think  that  Fraternal  Societies  can  transact  a  perfectly  safe  Endowment 
business  unless  the  rates,  rules  and  practice  of  old-line  insurance  companies  are 
adopted  and  followed.  What  is  commonly  called  Endowment  Insurance  as  carried 
on  by  the  regular  companies  is  certainly  not  Life  Insurance,  except  that  an  agreement 
is  made  to  pay  the  stipulated  sum  before  maturity  in  case  of  death.  Investment  for 
the  purpose  of  accumulating  money  is  probably  the  only  term  that  can  be  applied  to 
this  feature.  The  same  may  be  said  of  the  numerous  building  and  loan  association 
.schemes. 

A  Society  that  attaches  to  its  insurance  this  feature  and  derives  the  funds  with 
which  to  meet  matured  obligations  by  assessing  the  membership  must  ultimately  prove 
insolvent.  It  will  then  be  seen  that  the  moneys  paid  by  a  number  of  members  have 
been  absorbed  by  a  few.  We  must  therefore  assume  that  when  the  next  policies  or 
another  set  of  certificates  mature  the  increased  number  and  the  funds  required  to 
cancel  them  will  be  correspondingly  heavy. 

Mr.  Jeffries. 

I  do  not  wish  to  say  anything  on  the  subject,  but  I  understand  that  there  are  now 
in  this  body  members  of  an  association  that  are,  virtually,  paying  or  promising  to  pay 
Endowments.  Now,  I  would  like  to  hear  the  justification  from  those  Societies  for 
that  line  of  action.  I  understand  Brother  Boynton  is  the  champion  of  that  line  of 
insurance,  and  I  would  like  to  hear,  for  one,  what  he  has  got  to  say  on  the  subject. 
I  would  like  to  hear  an  explanation  of  their  plan,  or  their  proposed  plan,  rates,  etc., 
because  it  may  very  materially  affect  the  membership  of  this  Association.  There  are 
other  Societies  promising  the  same  thing,  and  if  it  can  be  done,  we  ought  to  know 
it,  and  we  ought  to  hear  the  other  side.  I  would  like  to  hear  from  Brother  Boynton, 
or  some  other  representative  of  some  of  the  Associations  that  do,  or  attempt  to 
transact,  that  line  of  business. 

Mr.  H.  H.  Morse : 

If  we  could  go  back  twenty-five  years  we  would  find  that  there  have  been  a  great 
many  things  in  connection  with  Life  Insurance  that,  from  our  standpoint,  have  been 
re-written,  and  if  this  question  had  been  propounded  to  the  Fraternal  Societies  that 
existed  twenty-five  years  ago,  "Can  a  Fraternal  Society  safely  pay  a  death  benefit?" 
the  probabilities  are  that  there  would  have  been  as  many  and  as  able  papers  read 
to  the  contrary  as  have  been  read  upon  this  subject  here  today.  But  in  regard  to  the 
main  proposition  as  contained  in  this  question,  our  friend  and  brother,  Mr.  Stevens, 
who  read  an  able  paper  a  few  minutes  ago,  concisely  answered  the  question.  Of 
course  it  can  be  done  if  a  sufficient  amount  is  collected  for  that  purpose.  Whether  a 
Fraternal  Society  should  engage  in  any  such  undertaking  is  a  mere  matter  of  judg- 
ment. There  are  Fraternal  Societies  of  one  kind  and  there  are  Fraternal  Societies  of 
another  kind.  Fraternal  Societies  are  forming  every  day,  and  it  does  not  behoove  us 
to  pass  judgment  in  regard  to  them.  It  does  not  devolve  upon  us  to  criticize  them. 
If  we  do  not  like  the  kind  of  Fraternal  Societies  that  are  being  organized  for  the 
purpose  of  paying  endowment  benefits,  leave  them  alone. 

It  may  be  that  some  propositions  are  ridiculous  and  foolish.  In  considering  this 
question  we  must  look  at  it  in  the  light  of  putting  ourselves  in  the  place  of  those  who 
are  members  of  these  organizations  and  who  believe  that  results  will  be  beneficial 


33 

to  them  from  the  management  of  the  Association  to  which  they  belong.  Some  of 
them  may  be  fraudulent,  some  of  them  may  be  vicious,  some  of  them  may  be  of  a 
different  character,  but  the  question  I  want  to  deal  with  particularly  is  the  question 
as  to  the  payment  of  a  disability  benefit  or  an  old  age  benefit,  as  it  is  paid  in  such 
reputable  organizations  as  the  Knights  of  Maccabees,  the  Chosen  Friends,  and  other 
institutions  that  have  existed  in  this  country  for  the  past  ten  or  twelve  years  and  are 
successful  in  carrying  on  their  Fraternal  work.  There  is  no  reason  in  the  world  why 
we  cannot  successfully  treat  a  fixed  period  of  life  as  a  maturity  of  certificate  pro- 
viding we  put  that  period  so  far  in  advance  as  to  render  all  questions  as  to  its  being 
a  proper  period  of  time.  If  a  man  has  lived  out  the  allotted  time  of  three  score  years 
and  ten,  if  a  man  has  passed  beyond  the  age  of  his  expectancy,  if  he  contributed  from 
time  to  time  as  required  for  the  fund  necessary  to  create  and  pay  the  benefits  that  he 
is  to  enjoy,  there  is  no  reason  why,  by  the  very  table  that  you  rely  upon  for  the 
payment  of  a  simple  death  benefit,  that  the  same  result  cannot  be  reached  for  the 
payment  of  a  maturity  certificate  at  70  or  75  years. 

Mr.  Hall: 

I  have  only  a  few  words  to  say.  There  is  one  question  that  has  not  been  touched 
upon — the  question  of  endowment  or  long  period  payments — which  I  think  is  of  interest 
for  us  all  to  consider.  Most  of  these  Fraternities  who  pay  a  benefit  to  members  at 
the  expectancy,  pay  but  half  of  the  amount  of  insurance,  and  the  other  half  remains 
to  be  paid  as  a  death  benefit.  The  value  which  is  paid  at  the  time  of  expiration  or 
on  arriving  at  the  age  of  expectancy  is  paid  in  by  the  member  during  the  time  that 
he  has  been  a  member  of  the  Association,  and  he  continues  to  pay  his  assessment  until 
the  time  of  death,  so  that  it  does  not  appear  to  me  that  there  is  an  Endowment 
feature,  such  as  we  call  the  Endowment  feature  when  we  speak  of  it  in  relation  to 
those  short  period  Endowments. 

Mr.  Boynton : 

The  great  trouble  with  the  speakers  who  have  preceded  me  is  that  they  are 
tinctured  badly  with  old  line  life  insurance  ideas.  I  hold  that  the  feature  which 
has  been  discussed  here  today  as  appertaining  to  the  Chosen  Friends,  the  Knights  of 
Maccabees  and  the  other  organizations,  is  not  an  Endowment  feature,  and  hence  don't 
come  in  under  the  objections  raised  by  the  members  who  have  discussed  this  question. 
We  are  very  apt  to  use  insurance  terms  in  trying  to  explain  our  own  system.  Now,  we 
are  not  insurance  organizations.  We  do  not  furnish  life  insurance.  That  is — we 
hadn't  ought  to  say  so.  (Laughter.)  Because  the  moment  that  you  use  those  terms 
that  moment  you  place  yourselves  on  the  same  plan  with  life  insurance  companies. 
We  do  not  claim  to  be  life  insurance  companies.  The  difference  between  the  ordinary 
life  insurance  company  and  fraternal  organizations  is  this  :  one  furnishes  life  insurance 
at  a  profit,  and  we  furnish  life  protection  at  cost.  That  is  the  difference.  It  is  not 
insurance.  Insurance  is  a  commodity.  They  come  into  the  market  and  make  all  they 
can  from  it,  and  we  go  into  the  market  for  mutual  protection,  and  give  it  to  our  mem- 
bers at  what  it  actually  costs.  There  is  no  question  about  that.  So  you  see  that  we 
get  off  our  base  in  using  such  language.  There  is  where  the  trouble  is.  We  don't 
want  to  characterize  this  7o-year  feature  as  an  Endowment  feature  at  all.  Nor  do  we 
want  to  admit  that  we  are  furnishing  life  insurance.  If  you  do,  you  give  yourselves 
away  every  time.  We  are  giving  protection  to  the  widows  and  the  orphans,  and 
nothing  more.  We  are  not  only  furnishing  protection  to  the  widows  and  the  orphans 
.  as  protection,  but  we  are  furnishing  protection  to  members  while  living,  and  when  they 
reach  the  age  of  70  we  extend  protection  still  further.  We  protect  them  in  their  old 
age  by  giving  them  certain  benefits.  Do  you- call  that  Endowment?  We  give  them 
the  money,  certainly,  but  no  more  than  we  give  the  widows  the  money.  You  may  as 
well  say  we  are  furnishing  Endowments  for  the  members  when  they  become  physically 
disabled  or  reach  the  age  of  70  years.  It  is  not  an  Endowment  at  all.  And  I  don't 
want  the  members  of  this  Fraternal  Congress  to  get  that  idea  into  their  heads.  If  you 
have  got  it,  get  it  out  as  soon  as  God  will  let  you,  and  don't  allude  to  it  in  those 
terms  again.  Don't  use  that  expression.  I  was  very  much  pleased  when  Brother 
Shields,  who  presided  over  this  Congress  a  year  ago,  called  a  member  to  order  when 
he  used  the  term  "life  insurance."  He  said  this  was  not  life  insurance — it  is  "life  protec- 
tion." And  since  that  time  I  have  never  used  the  term  "insurance"  or  "Endowment" 
in  any  discussion  I  have  had  in  any  of  the  public  meetings  I  have  held  throughout 


34 

the  country.  I  have  avoided  it,  and  urged  those  in  these  gatherings  to  drop  those 
terms  entirely,  and  they  have  done  it,  and  I  tell  you  we  are  bounding  ahead  on  the 
Fraternal  field  with  all  sails  spread. 

That  is  the  reason  why  I  want  this  Fraternal  Congress  to  open  the  door  to  every 
organization  that  has  that  feature  in  it — that  provides  fraternity  and  protection  to 
the  member  after  he  reaches  70  years  of  age  as  well  as  when  he  becomes  physically 
disabled.  I  do  not  know  that  I  would  particularly  object  to  paying  at  the  expectancy 
of  life,  but  still  it  is  not  as  good  as  fraternity  as  the  other  features.  (Laughter.)  It 
smacks  a  little  of  the  speculative — just  a  little  of  the  speculative — these  short-term 
fellows  who  pay  in  two,  four,  six,  seven  or  eight  years,  who  pay  something  for 
nothing.  We  cannot  class  them  as  Fraternities,  notwithstanding  they  have  hoisted 
the  Fraternal  flag.  They  are  sailing  under  false  colors.  They  are  speculative  organi- 
zations, and  every  one  who  goes  into  these  organizations  goes  in  there  for  the  pur- 
pose of  making  money,  and  when  you  and  I  join  the  Knights  of  Honor,  Royal  Arca- 
num or  the  Ancient  Order  of  United  Workmen,  we  do  not  go  in  for  speculation.  We 
do  not  expect  to  make  any  profits  from  membership  in  these  organizations,  but  we 
want  to  provide  something  for  those  that  we  leave  behind  us,  and  when  we  go  into 
the  Maccabees,  the  Chosen  Friends  and  other  good  organizations,  they  expect  to  have 
something  when  they  become  physically  disabled  or  reach  the  age  of  70. 

Mr.   Stevens : 

I  certainly  endorse  the  doctrine  that  Brother  Boynton  has  just  announced  here. 
I  claim  that  a  Fraternal  organization  can  pay  a  permanent  total  disability  benefit. 
I  claim,  as  I  did  in  my  paper,  that  it  will  cost  something  to  do  it.  It  will  cost  some- 
thing more  to  do  that  than  to  do  the  other.  I  claim  that  the  Order  which  pays  at 
the  age  of  70  or  72  or  75,  is  not  paying  an  Endowment  benefit  at  all  to  any  one.  It  is 
simply  paying  a  permanent,  total  disability  claim,  and  therefore  I  think  it  is  proper 
to  say  that  in  all  I  said  it  had  no  reference  to  that  principle,  because  I  feel  that  that 
is  a  permanent,  total  disability  payment,  and  not  an  Endowment  payment. 

W.  A.  Smith: 

I  shall  not  detain  you  long  in  the  remarks  I  have  to  submit.  Do  Fraternal  Societies 
make  money  by  lapses?  Here  is  a  question  that  is  rather  delicate,  and,  to  me,  is  one 
of  great  importance.  Old-line  insurance  companies  make  their  money  by  lapses. 
Are  we,  a  Fraternal  Society,  going  to  take  the  ground  that  we  must  make  our  money 
by  lapses?  Are  we  going  to  take  the  ground  that  we  must  make  our  money  from 
the  unfortunates  who  are  not  able  to  keep  up  their  assessments?  That  is  the  point. 
Is  that  Fraternity?  Is  there  any  Fraternity  in  it?  This  feature  of  Endowment  has 
been  referred  to,  and  I  believe  the  brother  is  right  and  honest  in  the  conclusions 
that  he  has  announced,  that  the  Endowment  feature  will  enhance  the  cost.  It  cer- 
tainly will.  But  what  I  wanted  to  say  was  that  the  Endowment  feature,  as  it  is 
carried  on  by  the  Society  to  which  I  belong,  pays  one-half  of  the  amount  at  ex- 
pectancy. When  one-half  has  been  paid  at  the  period  of  expectancy  they  go  on  and 
pay  as  they  have  done  before,  carrying  their  assessment,  and  the  result  will  be.  if  they 
live  a  certain  number  of  years,  that  they  in  course  of  time  will  die.  Then  the 
Society  is  reimbursed  from  the  fact  that  it  has  only  to  pay  half  the  amount. 

Following  the  discussion  a  resolution  was  adopted  which  instructed  the  Com- 
mittee on  Legislation  to  "draft  a  bill  for  regulating  the  business  and  defining  the  status 
of  Fraternal  Societies,  to  be  submitted  to  the  several  Legislatures." 

This  discussion  of  "Endowments"  was  due  to  legislative  recognition  of  such  con- 
cerns as  the  Iron  Hall  as  Fraternal  Beneficiary  Societies.  Failures  amongst  these 
"Endowment  Fraternities"  were  anticipated  and  their  methods  were  bringing  into 
disrepute  the  Fraternal  Orders  like  the  A.  O.  U.  W.,  Royal  Arcanum  and  others. 

In  passing,  it  may  be  an  item  of  interest  to  give  the  following  majority  and 
minority  reports  from  the  Committee  on  Laws  and  Constitution.  After  discussion, 
the  Independent  Order  of  Foresters  was  admitted  to  membership.  The  reports 
follow : 

Your   Committee   on   Legislation,   Laws   and    Constitution,  to   whom   has  been   re- 


35 

ferred  the  matter  of  the  application  of  the  Independent  Order  of  Foresters,  would 
respectfully  report  as  follows : 

1.  That    having    accorded    the    representative    of    said    Order    a    due    and   proper 
hearing    by    your    Committee,    and    after    an    examination    of    its    Constitution,    your 
Committee    found    that   the    Constitution    of    said    Order   contained    provisions    which 
made  it  ineligible  for  membership  in  this  Congress,  as  it  now  defines  a  Fraternal  Order 
in  its   Constitution. 

2.  That  your  Committee  deem  it  inexpedient  and  inadvisable  to  further  amend  the 
Constitution    of   this   Congress   that   it   may  provide   for   membership   therein   of   any 
Order   containing   any   provisions   or    features   of   any   character   other   than    such   as 
they  now   have  and  may  have  under  the  definition  of  a  Fraternal  Order,  and   now 
provided  for  in  the  Constitution  of  the  Congress. 

3.  That  your  Committee  therefore  recommend  the  Independent  Order  of  Forest- 
ers be  not  admitted  to  membership,  because  of  its  ineligibility,  and  that  it  has  leave 
to  withdraw  its  application. 

The  minority  of  the  Committee  on  Constitution,  Laws  and  Legislation  dissent 
from  the  majority  and  would  recommend  the  adoption  of  the  following  amendments 
to  our  Constitution  and  Laws : 

To  amend  paragraph  4,  page  56,  as  follows :  By  inserting  after  "disability,"  in  the 
sixth  line,  the  following:  "Old  age  (to  be  not  less  than  63  years  of  age,  with  a 
minimum  duration  of  membership  of  nineteen  years)." 

Also  to  amend  sub-division  5  by  adding  the  following:  "Or  upon  attainment  of 
old  age  (not  less  than  63  years)." 

N.     S.     BOYNTON, 

M.  G.   JEFFRIES. 
S.  A.  WILL. 

The  report  of  the  Committee  on  Legislation  was  unanimously  adopted,  and  with 
that  adoption  commenced  that  vigorous  and  systematic  activity  which  ever  afterward 
has  characterized  the  work  of  the  Congress  in  shaping  legislation  in  the  several 
States.  I  quote  at  length : 

The  Committee  on  Legislation,  Laws  and  Constitution  respectfully  report  that 
the  year  1891,  in  regard  to  legislation,  proposed  and  enacted,  has  been  fruitful  in  sug- 
gestion and  in  warning.  It  has  been  the  legislative  year  in  the  large  majority  of  States, 
and  in  most  of  them  there  has  been  some  action  proposed  of  importance  to  Fraternal 
Beneficiary  Associations.  We  have,  however,  learned  one  valuable  lesson  from  the 
experience  of  the  year,  even  if  much  which  ought  to  have  been  done  has  been  omitted. 
That  lesson  is  the  absolute  necessity  of  clothing  this  Committee  with  larger  powers 
and  placing  at  their  command  more  adequate  financial  strength  if  it  is  expected  that 
the  Congress  will  secure  for  the  Fraternal  system  which  it  represents  desirable  har- 
mony of  the  laws,  or  prevent  the  adoption  of  restrictive  and  hampering  legislation. 
It  is  impossible  to  accomplish  by  correspondence  the  best  results  in  either  of  these 
directions.  The  presence  of  the  Committee,  or  some  member  of  it,  at  important 
crises,  either  for  the  purpose  of  attack  or  defense,  is  absolutely  essential  in  very 
many  instances.  So  far  as  our  experience  has  gone  the  presence  of  a  representative 
of  this  Congress,  strengthened  by  the  influence  which  such  representative  power 
gives,  has  proved  effectual  and  salutary.  The  Committee  has  not  felt  authorized  to 
charge  the  Congress  with  expense  in  this  respect.  They  recommend  that  their  succes- 
sors be  authorized,  with  the  approval  of  the  Executive  Committee,  or  other  advisory 
board,  to  incur  such  expense  for  personal  visitation  before  Legislatures  Lnd  legislative 
committees  and  for  correspondence  and  assistance,  as  may,  from  time  to  time,  appear 
to  be  necessary  and  proper  for  the  common  protection  of  our  important  interests. 

A  valuable  result  of  uniformity  of  legislation  will  be  probably,  that  we  shall  obtain 
in  most,  if  not  all  the  localities,  laws  applicable  to  our  system  alone,  and  that  we 
shall  no  longer  be  associated  with  other  and  antagonistic  systems  in  the  same  bill  or 
Act.  The  average  legislator  today  is  in  a  woeful  condition  of  ignorance  as  to  what 
a  Fraternal  Order  includes.  In  New  Hampshire  and  Rhode  Island,  and  perhaps 
elsewhere,  the  members  of  the  Legislatures  classed  bond  companies,  endowment  or- 


36 

ganizations  and  death  benefit  paying  orders  together,  and  it  was  in  many  instances 
extiemely  difficult  to  convince  such  members  that  the  same  objections  did  not  apply 
to  all  alike.  The  result  is  the  passage  in  New  Hampshire  of  one  Act  which  includes 
all  of  these  several  kinds  of  organizations.  While  we  have  no  criticism  to  make  in 
this  place  of  our  associates  in  that  Act,  we  do  most  emphatically  declare  it  to  be  our 
wish  in  all  States  to  have  separate  legislation  for  our  system.  Furthermore,  we 
believe  that  such  legislation  in  each  State  should  be  the  authority  for  the  admission 
therein  of  all  Societies  embraced  within  the  terms  thereof,  and  that  such  admission 
should  not  be  by  license  from  the  Insurance  Department  or  any  State  officer.  It 
seems  abhorrent  to  our  Fraternal  sensibility  to  be  compelled  to  obtain  a  license  to 
perform  our  deeds  of  charity  and  benevolence.  We  do  not  object  to  a  requirement 
for  annual  reports,  but  we  do  ask  that  the  Legislature  shall  settle  by  appropriate 
language  the  quesion  of  admission  and  not  delegate  the  power  to  any  one  man  or 
any  body  of  men. 

The  value  of  harmony  and  uniformity  in  State  legislation  is  of  no  greater  impor- 
tance than  the  existence  of  the  same  qualities  in  the  decisions  of  the  courts  in  the 
several  States  and  Provinces.  Our  Societies  ought  not  to  be  subjected  to  the  pos- 
sibility of  a  successful  attack  in  Massachusetts  which  would  be  defeated  in  Illinois, 
and,  on  the  other  hand,  the  member,  or  his  beneficiary,  should  be  accorded  the  same 
privileges  to  secure  judicial  recognition  in  the  one  State  as  the  other. 

The  Congress  should  adopt  some  measures  whereby  defenses  to  unjust  demands 
may  be  so  conducted  everywhere  that  all  the  essential  grounds  of  defense  for  similar 
causes  of  action  should  be  presented,  to  the  end  that  courts  reach  a  harmony  and 
uniformity  of  conclusion.  If  the  Congress  will  clothe  our  successors,  or  some  other 
committee,  or  some  of  its  officers,  with  power  to  act  as  advisory  counsellors  for  the 
local  attorneys  of  the  Societies  which  compose  its  membership,  we  believe  that  much 
good  will  be  attained.  This  proposition  does  not  in  the  slightest  degree  disparage 
the  ability  of  counsel  representing  our  Fraternities.  In  all  cases  they  may  be  better 
lawyers  than  any  who  are  available  for  the  purpose  presented,  but  the  special  expe- 
rience of  the  less  able  counsellor  may  happily  supplement  the  skill  and  learning  of 
the  more  able  practitioner. 

Brothers,  we  believe  that  the  time  has  arrived,  in  the  history  of  the  Congress, 
when  it  should  formulate  and  adopt  sound  methods  and  measures  for  the  common 
weal,  and  carry  them  into  prompt  and  effective  execution. 

We  have  met  in  four  annual  sessions  and  discussed  the  feasibility  of  our  undertak- 
ing for  practical  work.  By  patient,  earnest  and  laborious  effort  the  friends  of  a 
National  Fraternal  Congress  have  succeeded  in  creating  a  strong  sentiment  in  favor 
of  its  existence.  To  reach  this  opinion  'the  progress  has  been  exceedingly  slow.  It 
has,  however,  been  attained,  and  we  find  a  satisfactory  degree  of  support  from  all  our 
leading  Fraternities.  But  the  Societies  which  are  here  represented  expect,  now 
that  we  have  become  a  strong  organization,  that  we  shall  do  something  more  than 
hold  annual  meetings,  however  fruitful  they  may  be  in  cultivating  social  and  friendly 
relations  and  in  valuable  discussions  of  vital  questions.  While  there  are  many  and 
varied  ways  in  which  the  Congress  can  serve  our  Orders,  none  exceed  in  importance 
those  whic'h  pertain  to  legislation  and  courts.  They  expect  that  we  shall  proceed 
to  the  accomplishment  of  our  legitimate  functions  and  duties.  If  we  will  do  these 
things,  they  will,  if  we  understand  aright  the  prevailing  feeling,  accord  to  us  all  the 
support,  financial  and  otherwise,  necessary  for  the  purpose,  and  if  we  fail  in  this  duty, 
they  will  withdraw  the  favors  'hitherto  generously  granted,  and  the  Congress  must 
disband. 

Your  Committee,  therefore,  in  order  that  the  suggestions  which  they  have  made 
and  which  they  deem  of  vital  importance  to  the  prosperity  of  the  cause  we  so  gladly 
and  proudly  represent,  and  for  the  continued  existence  of  this  _  Congress  of  Fraterni- 
ties, shall  not  remain  mere  propositions,  but  become  operative  and  useful  forces, 
herewith  present  certain  resolutions,  the  adoption  of  which  they  heartily  recommend : 

Resolved.  That  the  action  of  the  Congress  in  providing  for  a  committee  to  pre- 
pare a  public  Act  relative  to  our  Societies,  and  to  press  the  adoption  thereof  in  the 
several  States  and  Provinces,  be  re-affirmed,  and  that  the  members  of  the  Standing 
Committee  on  Legislation,  Laws  and  Constitution  be  added  to  and  made  ex  officio 
members  of  that  committee. 

Resolved,  That  the  Standing  Committee  on  Legislation,  Laws  and  Constitution  be 
instructed  to  take  all  needful  and  proper  steps  to  ascertain  what  are  the  laws  of  the 
several  States,  Provinces,  Territories  and  districts  affecting  our  Societies,  and,  in 


37 

regard  thereto,  to  do  whatever  may  seem  to  them  required  for  the  common  protec- 
tion, if,  in  their  judgment,  any  efforts  are  necessary  in  addition  to  those  which  the 
Special  Committee  are  authorized  to  perform. 

Resolved,  That  the  Standing  Committee  on  Legislation,  Laws  and  Constitution  be 
instructed  and  authorized  to  act  as  advisory  counsellors  in  any  and  all  suits  against 
our  Societies,  and  that  each  Society  is  hereby  urged  to  notify  the  Committee  of  all 
suits  against  it,  the  substance  of  the  claims  thereby  respectively  presented,  and  the 
name  of  the  attorney  conducting  the  defense,  and  that  the  Committee  keep  a  record  of 
such  suits  and  their  action  in  regard  thereto. 

Resolved,  That  the  Committee  on  Legislation,  Laws  and  Constitution  be  author- 
ized, upon  the  previous  approval  in  writing  thereof  by  the  President,  Vice-President 
and  Chairman  of  the  Finance  Committee,  to  incur  such  expenses  as  may  be  necessary 
to  properly  perform  their  duties. 

Resolved,  That,  for  the  purpose  of  obtaining  the  necessary  funds  to  carry  out  the 
provisions  of  the  resolutions  hereinbefore  presented,  and  also  for  the  performance  by 
the  Special  Committee  of  its  work,  the  provisions  of  paragraph  4  of  Section  5  of  the 
Constitution  and  Laws  be  suspended  for  the  year  next  ensuing,  and  that  for  such  year, 
but  not  afterward,  except  by  due  vote  of  the  Congress  therefor,  the  membership  fee 
for  each  Society  shall  be  $20.00,  and,  in  addition  thereto,  the  sum.  of  one  mill  for  each 
and  every  one  of  its  members  in  good  standing  on  the  31  st  day  of  December,  1891. 

JOHN   HASKELL  BUTLER, 
J.    W.    KINSLEY, 
J.  M,  SWAIN, 
M.  W,  SACKETT, 
S.  A.  WILL, 
JOHN   OTTO, 
F.  D.  MACBETH, 
M.   G.   JEFFRIES, 
N.  S.  BOYNTON. 

At  this  time  (1891)  the  "Open  Assessment  Associations"  were  numerous  and 
popular,  and  the  question  of  distinguishing  between  them  and  the  Fraternal  Bene- 
ficiary Societies  became  one  of  importance.  To  indicate  the  thought  of  the  day  I 
quote  from  a  paper  read  by  Mr.  D.  E.  Stevens  in  discussing  "Topic  15"  of  the  pro- 
gram: 

"How  can  our  laws  be  so  framed  as  to  secure  from  the  courts  decisions  which 
will  clearly  define  the  difference  between  the  Charitable  Aid  furnished  by  the  Fra- 
ternal Orders  and  the  business  payments  of  the  Open  Assessment  Association." 

The  word  charitable  in  this  question,  I  take  it,  is  used  in  its  primary  and  best 
sense.  The  question,  in  the  light  of  the  more  common  meaning  of  the  word  char- 
itable, would  probably  have  been  more  readily  or  fully  understood  if  it  had  read, 
"How  can  the  Laws  of  Fraternal  Orders  be  so  framed  as  to  secure  from  the  courts 
decisions  such  as  will  clearly  recognize  the  difference  between  such  Orders  and  Open 
Assessment  Associations?"  It  appears  to  me  that  a  comprehensive  and  proper  answer 
to  this  question  would  be,  let  our  laws  be  so  framed  and  maintained  as  to  clearly 
show  that  the  aid  which  we  furnish  is  fraternal  or  charitable — that  is,  that  our  corner- 
stones, as  well  as  the  Orders  builded  thereon,  rest  upon  a  foundation  of  brotherhood. 
With  no  word  of  criticism  for  the  Assessment  Company  nor  any  institution  which  in 
any  manner  tends  to  help  men  do  we  come  to  the  consideration  of  this  question.  We 
cannot  in  justice  to  the  Orders  separately  consider  one  feature  of  their  work,  even 
though  it  be  an  important  one,  and  especially  not  the  payment  of  death  benefits,  for 
most  of  the  Orders  protect  the  interests  of  their  worthy  members  against  forfeiture 
during  sickness,  without  compensation  or  return,  aside  from  the  Fraternal  feeling  or 
principle.  When  viewed  as  a  whole,  there  is  a  wide  difference  between  a  genuine 
Fraternal  Order  and  an  Assessment  Company.  In  fact,  although  in  one  particular, 
that  of  the  payment  of  death  benefits,  they  may  each  have  a  road  which  leads  to  the 
same  end,  they  are  as  to  foundation  and  structure  entirely  different.  The  Company 
depends  upon  its  army  of  paid  agents  to  secure  new  members,  while  the  Order,  in 
exemplification  of  its  principles  and  the  carrying  out  of  its  system,  depends  upon  its 


38 

anmy  of  unpaid  members  to  secure  new  entrants.  The  Company  charges  from  three 
to  four  dollars  per  thousand  per  annum  for  expenses,  so  as  to  carry  out  its  plans, 
while  the  Order  collects  from  thirty  to  fifty  cents  per  thousand  per  annum  for  expenses 
to  carry  out  its  plans.  The  difference  of  from  $2.70  to  $3.50  per  thousand  per  annum 
standing  for  the  difference  between  the  business  transaction  where  the  labor  is  paid 
for  and  the  voluntary,  unpaid  labor  of  the  members  of  the  brotherhood,  who,  through 
their  interest  in  and  love  for  their  Order  and  their  fellowmen,  .gladly  do  the  work. 
Are  some  of  our  Lodges  forgetting  this  great  difference?  That  cannot  change  the 
principle.  The  Fraternal  Order  through  its  Lodge  system  provides  for  the  visitation 
of  its  sick ;  helping  its  own  in  their  time  of  need,  and  admits  to  membership  only 
those  who  agree  to  become  a  part  of  a  great  brotherhood,  which  not  only  pays  benefits 
to  the  families  of  its  deceased  members,  but  which  inculcates  lessons  of  chanty  by 
doing  deeds  of  charity.  The  Order  constantly  appeals  to  man's  better  nature,  even 
tending  to  make  him  a  nobler  man  and  better  citizen. 

Such.  Orders  certainly  must  watch  well  against  and  promptly  check  the  growing 
disposition  to  make  them  Life  Insurance  Companies,  by  copying  into  their  laws1  those 
features  which  now  distinctly  mark  the  difference  between  Companies  and  Orders. 
To  show  a  difference,  there  must,  in  fact,  be  a  difference.  When  an  Order  has  only 
the  semblance  of  the  Lodge  system;  when  an  individual  can  become  a  member  with- 
out entering  one  of  its  Lodge  rooms;  when  it  undertakes  to  do  an  endowment  or 
tontine  business;  when  it  forgets  or  forsakes  the  visitation  of  its  sick,  having  only 
the  form  and  none  of  the  spirit  of  an  Order;  when:  its  plans  appeal  to  the  selfish 
side  of  man ;  when  new  members  for  its  established  Lodges  are  secured  through  paid 
agents;  when  it  permits  members  to  name  as  beneficiaries  those  who  are  not  of  their 
families,  heirs  or  dependent  ones ;  when  it  says  -that  an  insurable  interest,  growing 
out  of  an  indebtedness  to  one  of  no  relation  to  the  member,  may  be  covered  by  mem- 
bership in  it;  when  it  allows  a  man  who  has  an  insurable  interest  in  his  partner  to 
cover  that  by  one  of  its  benefit  certificates ;  when  its  members  can  make  their  estates, 
and  thereby  their  creditors,  their  beneficiaries ;  when  its  benefit  certificates  hare  a 
surrender  value,  then  I  beg  to  ask  how  a  Court  or  anyone  else  is  to  tell  why  it  should 
not  be  called  an  Insurance  Company  or  Association,  and,  although  it  may  call  itself 
an  Order,  it  will  in  no  sense  be  such,  nor  should  it. 

Let  the  language  of  our  laws  clearly  express  the  contract  of  membership  showing 
that  each  and  all  of  the  members  are  part  of  a  brotherhood,  not  for  speculation  or 
profit,  but  to  help  each  other ;  making  the  supreme  body  of  the  Order  the  Court  in 
which  all  grievances  shall  be  heard  and  rights  determined.  Then  secure  in  such 
States  as  now  have  no  such  laws  the  passage  of  laws  providing  that  in  such  Orders 
the  contract  entered  into  by  the  members  thereof  shall  govern  and  be  the  only  guide 
as  to  what  was  intended,  and  that  all  of  the  members  shall  be  governed  thereby. 
Then  the  Orders  which  adhere  to  the  foundation  principles  that  underlie  all  of  the 
genuine  Beneficial  Orders  of  America  to-day — that  of  a  body  of  men  bound  together 
for  their  common  good,  each  endeavoring  to  help  the  other  in  truly  carrying  out  all 
that  is  included  in  the  Lodge  system  of  a  true  Fraternal  Order;  admitting  to  mem- 
bership those  only  who  enter  the  portals  of  their  Lodges  in  the  appointed  way ; 
helping  its  needy,  visiting  and  comforting  its  sick,  burying  its  dead,  furnishing  its  own 
members  relief  if  wholly  disabled  by  disease,  accident  or  old  age,  and  to  the  widow 
and  orphans  of  its  deceased  members  the  means  for  their  sustenance;  knowing  and 
raring  for  its  own  and  their  loved  ones,  and  they  alone,  leaving  to  other  institutions 
all  of  the  field  which  has,  and  forever  should,  lay  outside  the  lines  of  a  Secret  Bene- 
ficial Order,  there  is,  and  will  be,  a  difference,  and  such  a  difference  as  must  finally 
triumph  in  equity,  in  law  and  in  popular  favor. 

John  A.  Hinsey's  remarks  on  Topic  15  were  as  follows: 

This  question  is  one  that  involves  much  study.  Nearly  all  of  the  Fraternal  Socie- 
ties who  pay  to  the  beneficiaries  of  deceased  members  a  death  benefit  of  $1,000  or 
more  will  certainly  not  claim  that  such  contribution  is  purely  a  charitable  aid ;  in 
fact,  many  of  us  are  in  the  insurance  field  competing  with  the  open  assessment  asso- 
ciations and  old  line  companies  as  well  as  with  all  other  insurance  concerns. 

The  organizers  of  subordinate  bodies  in  their  endeavors  to  obtain  membership 
certainly  do  not  claim  that  theirs  is  not  an  insurance  based  upon  business  principles. 
On  the  contrary,  so  far  as  this  insurance  itself  is  concerned,  they  make  that  claim 


39 

strongly.  True,  we  are  not  corporate  bodies  organized  for  the  purpose  of  gain,  and 
there  are  no  stockholders,  directors  or  other  officers  receiving  large  salaries,  while 
with  the  open  assessment  associations  such  is  to  a  great  extent  the  case.  We  are  doing 
business  for  mutual  aid  only,  and  in  doing  so  the  cost  in  guaranteeing  a  certain  amount 
of  protection  has  been  placed  at  an  absolute  minimum  figure,  while  the  associations 
termed  by  the  Congress  "open  assessment"  have  no  doubt  also  placed  the  mortality 
cost  as  low  as  safety  will  permit,  but  in  addition  thereto  various  factors,  such  as 
expense,  reserve  fund,  etc.,  have  been  added,  which  together  aggregate  a  cost  much 
greater  than  ours. 

The  insurance  laws  of  a  number  of  States  exempt  us  as  secret  Fraternal  Societies 
from  compliance  with  the  requirements  of  open  assessment  associations  and  old  line 
companies,  and  no  doubt  in  a  number  of  cases  the  decisions  of  courts  have  defined 
clearly  the  difference,  especially  in  the  fact  that  members  of  Fraternal  Orders  agree 
to  abide  by  the  laws,  rules  and  regulations  that  may  be  from  time  to  time  enacted; 
that  such  agreement  forms  the  contract  by  which  they  are  bound.  It  has;  also  been 
held  that  the  violation  of  any  agreement,  or  a  failure  to  obey  the  laws  as  enacted 
from  time  to  time,  may  work  a  valid  forfeiture  of  all  rights,  title  and  interest  in  the 
benefit  fund. 

However,  when  the  beneficiary  of  a  member  seeks  to  enforce  the  payment  of  a 
contract  which,  for  some  apparent  good  reason,  has  been  refused,  the  issues  assume 
a  legal  aspect  and  must  be  treated  in  that  manner  when  presented  for  judicial  decision. 
Under  such  circumstances  courts  would  no  doubt  define  us  as  business  institutions 
and  compel  the  performance  of  such  contract  in  the  same  manner  as  they  would  if 
the  action  had  been  brought  against  an  open  assessment  association. 

In  1913  how  nearly  do  Fraternal  Beneficiary  Societies  approach  the  status  of 
"Open  Assessment  Associations"  of  1891  ? 

The  session  of  1891  was  a  memorable  one  for  the  number  of  important  questions 
discussed  and  plans  for  action  adopted.  The  subject  of  "Uniform  Blanks"  was  thor- 
oughly considered,  and  the  remarks  of  Mr.  J.  A.  Hinsey  should  prove  of  interest : 

I  have  given  the  question  of  reporting  to  State  insurance  departments  considerable 
study.  There  are  now  a  number  of  different  forms  in  use.  For  Fraternal  Societies 
I  regard  the  form  in  use  by  the  insurance  department  of  the  State  of  New  York 
to  be  the  mostj  complete  of  any  of  the  States  to  which  we  are  now  making  reports ; 
and  Iowa  and  Wisconsin  have  adopted  this  form  almost  wholly.  The  forms  of  each 
of  the  other  States  to  which  we  are  now*  reporting  are  quite  different,  though  in  none 
of  them  the  information  desired  covered  so  wide  a  range.  The  Nebraska  form  is, 
to  my  mind,  the  most  defective. 

A  brief  synopsis  of  the  requirements  under  the  New  York  form  is  herewith  given : 

First. — Balance  sheet  showing  cash  receipts  and  disbursements  and  balance  on 
hand  at  the  end  of  the  year. 

Second. — Statement  of  invested  assets. 

Third. — Statement  of  non-invested  assets. 

Fourth. — Statement  of  liabilities. 

Fifth. — Statement  of  contingent  mortuary  assets. 

Sixth. — Statement  of  contingent  mortuary  liabilities. 

Seventh. — Exhibit  of  certificates  or  policies,  requiring  under  the  separate  headings 
the  number  of  members  under  one  heading  and  the  membership  for  the  State  only 
under  another.  Following  same  appears  an  exhibit  of  the  number  of  members  and 
the  amount  of  insurance  in  force  under  each  age  (present  age  being  desired). 

Eighth. — A  number  of  miscellaneous  questions  embracing  general  information 
regarding  the  character  of  the  business  of  the  association,  its  plans,  manner  of 
electing  officers,  etc.,  then  follows: 


40 

Ninth. — A  list  of  all  losses  paid  during  the  year,  requiring  the  certificate  of  policy, 
number,  name,  date  of  payment,  etc. 

Tenth. — A  list  of  all  losses  unpaid  at  end  of  year. 

Eleventh. — An  exhibit  of  assessments  made  during  the  year.  This  statement 
requires  information  as  to  number  of  assessment,  class,  date  of  issue,  number  of 
members  in  force  at  time  of  issue,  the  number  actually  assessed,  the  amount  of  assess- 
ment, the  amount  collected  and  its  final  disposition ;  whether  disbursed  for  death 
losses  or  other  items. 

Twelfth. — A  number  of  schedule  forms  requiring  information  as  to  invested  assets 
of  every  description,  information  as  to  values,  incumbrances,  etc.,  being  required. 

The  Societies  represented  in  the  Congress  in  1891  were :  Ancient  Order  United 
Workmen,  Knights  of  Honor,  Royal  Arcanum,  American  Legion  of  Honor,  Order  of 
Chosen  Friends,  'National  Union,  Knights  of  Maccabees,  Order  of  United  Friends, 
Royal  Templars  of  Temperance,  Equitable  Aid  Union,  Knights  and  Ladies  of  Honor, 
Improved  Order  of  Heptasophs,  Home  Circle,  Fraternal  Mystic  Circle,  Knights  of 
the  Golden  Rule,  Fraternal  Legion,  Order  of  Golden  Chain,  Order  of  Mutual  Pro- 
tection, Royal  Society  of  Goodfellows,  North  Mutual  Relief  Association,  Endow- 
ment Rank  Knights  of  Pythias,  United  Order  of  Pilgrim  Fathers,  Protected  Home 
Circle,  Artisans!  Order  of  Mutual  Protection,  Legion  of  the  Red  Cross,  Woodmen  of 
the  World,  Knights  of  St.  John  and  Malta,  Independent  Order  of  Foresters  and  the 
Iowa  Legion  of  Honor.  The  28  Orders  had  about  twelve  hundred  and  fifty  thousand 
members. 

This  congress,  authorized  the  appointment  of  a  Special  Committee  to  draft  a 
Uniform  Bill  which  was  to  serve  for  the  years  1892-3  (just  100  years  after  the  first 
Act  of  Parliament  for  the  regulation  of  Friendly  Societies,  and  twenty  years  after 
the  great  Act  of  1875).  The  Bill  prepared  by  this  Special  Committee  has  been  the 
model  from  which  others  have  been  written.  The  men  who  composed  the  Committee 
were:  John  Haskell  Butler,  Massachusetts;  W.  B.  Beebe,  Connecticut;  H.  H.  Morse, 
New  York;  John  Otto,  New  Jersey;  M.  W.  Sackett,  Pennsylvania;  John  B.  Treibler, 
Delaware ;  Oliver  B.  Craig,  Maryland ;  D.  E.  Stevens,  Ohio ;  Frank  D.  Macbeth, 
Indiana;  Frank  N.  Gage,  Illinois;  D.  P.  Markey,  Michigan;  John  A.  Hinsey,  Wis- 
consin; E.  R.  Hutchins,  Iowa;  B.  F.  Wilson,  Missouri;  W.  O.  Rodgers,  Nebraska; 
J.  W.  Kinsley,  Montana;  B.  A.  Harlan,  District  of  Columbia;  J.  A.  McGillivray, 
Ontario;  H.  C.  Sessions,  South  Dakota;  A.  R.  Savage,  Maine.  Subsequently  there 
were  added  to  the  Committee:  M.  G.  Jeffries,  Wisconsin;  J.  E.  Shepard,  Massa- 
chusetts; W.  R.  Spooner,  New  York;  W.  A.  Fricke,  Wisconsin;  M.  W.  Van  Auken, 
New  York;  J.  J.  Acker,  New  York;  W.  N.  Davenport,  Massachusetts. 

At  the  sixth  Annual  Session  of  the  National  Fraternal  Congress,  held  in  Wash- 
ington, D.  C.,  November  15,  1892,  this  Special  Committee  was  consolidated  with  the 
standing  Committee  on  Legislation,  composed  of  S.  A.  Will,  Julius  Swain.  N.  S. 
Boynton,  W.  O.  Robson  and  John  A.  Hinsey  and  others  already  mentioned. 

The  Special  Committee  on  the  Revision  of  the  Uniform  Laws  to  be  entitled,  "An 
Act  Regulating  Fraternal  Beneficiary  Societies,  Orders  or  Associations,"  reported  a 
Bill  of  fifteen  sections,  in  full,  or  in  substance,  as  follows : 

Section  I. — A  fraternal  beneficiary  association  is  hereby  declared  to  be  a  corpora- 
tion, society  or  voluntary  association,  formed  or  organized  and  carried  on  for  the 
sole  benefit  of  its  members  and  their  beneficiaries,  and  not  for  profit.  Each  associa- 
tion shall  have  a  lodge  system,  with  ritualistic  form  of  work  and  representative  form 
of  government,  and  shall  make  provision  for  the  payment  of  benefits  in  case  of 


41 

sickness,  disability  or  death  of  its  members,  subject  to  their  compliance  with  its  con- 
stitution and  laws.  The  fund  from  which  the  payment  of  such  benefits  shall  be  made, 
and  the  fund  from  which  the  expenses  of  such  association  shall  be  defrayed  shall  be 
derived  from  assessments  or  dues  collected  from  its  members.  Payment  of  death 
benefits  shall  be  to  the  families,  heirs,  blood  relatives,  affianced  husband,  affianced  wife 
of,  or  to  persons  dependent  upon  the  member.  Such  associations  shall  be  governed 
by  this  Act  and  shall  be  exempt  from  the  provisions  of  insurance  laws  of  this  State, 
aiid  no  law  hereafter  passed  shall  apply  to  them  unless  they  be  expressly  designated 
therein. 

Section  2  provides  that  all  associations  then  doing  business  _  in  the  State,  and 
coming  within  the  description  of  Section  i,  may  continue  such  business. 

Section  3  provides  that  any  association  coming  within  the  description  of  Section 
i,  organized  in  another  State  or  Province,  but  not  then  doing  business  in  the  State, 
should  be  admitted  on  filing  copy  of  charter,  etc.,  and  paying  prescribed  fees. 

Section  4  provides  for  an  annual  report  to  be  filed  by  March  I  and  giving  details 
of  condition  under  twenty-five  items  specified  in  the  Bill.  The  Commissioner  is 
empowered  to  require  any  additional  information  "in  relation  to  its  doings  or  con- 
dition, or  any  other  matter  connected  with  its  transactions  relative  to  the  business  con- 
templated by  this  Act,  and  such  officers  of  such  associations  as  the  Commissioner  of 
Insurance  may  require  shall  promptly  reply  in  writing,  under  oath,  to  all  such 
inquiries." 

Section  5  provides  that  the  Commissioner  of  Insurance  shall  be  appointed  as 
attorney  to  accept  service  of  any  legal  action. 

Section  6  provides  for  the  issuance  of  a  license. 
Section  7  provides  for  incorporation. 

Section  8. — Such  associations  shall  not  employ  paid  agents  in  soliciting  or  procuring 
members  except  in  the  organizing  or  building  up  of  subordinate  bodies  or  granting 
members  inducements  to  procure  new  members. 

Section  9.— No  contract  with  any  such  association  shall  be  valid  when  there  is  a 
contract,  agreement  or  understanding  between  the  member  and  the  beneficiary  that 
the  beneficiary  or  any  person  for  him  shall  pay  such  member's  assessments  and  dues, 
or  either  of  them. 

Section  10. — The  money  or  other  benefit,  charity,  relief  or  aid  to  be  paid,  provided 
or  rendered  by  any  association  authorized  to  do  business  under  this  Act  shall  not 
be  liable  to  attachment  by  trustee,  garnishee  or  other  process  and  shall  not  be  seized, 
taken,  appropriated  or  applied  by  any  legal  or  equitable  process,  or  by  operation  of  law 
to  pay  any  debt  or  liability  of  a  certificate  holder  or  of  any  beneficiary  named  in  a 
certificate,  or  of  any  person  who  may  have  any  right  thereunder. 

Section  n  provides  for  meeting  of  the  legislative  bodies  in  other  States  or  Prov- 
inces than  where  incorporated. 

Section  12  provides  penalties  for  false  and  fraudulent  statements. 

Section  13  provides  procedure  against  an  association  for  refusing  to  make  report 
as  required. 

Section  14  provides  penalty  for  acting  as  officer,  agent,  or  otherwise  in  violation 
of  the  law. 

Section  15  provides  for  the  repeal  of  laws  inconsistent  with  the  Act,  and  exempting 
Masons,  Odd  Fellows  and  similar  Orders  from  the  application  of  the  Act. 

By  unanimous  consent  the  Uniform  Bill  as  reported  was  referred  to  a  Special 
Committee  of  five  to  be  edited  before  being  printed  and  the  President  (M.  G.  Jeffries) 
was  appointed  as  the  special  representative  of  the  Congress  to  attend  the  next  Con- 
vention of  Insurance  Commissioners  and  present  for  their  approval  the  Uniform  Bill. 

It  was  reported  to  the  Congress  that  contemplated  legislation  in  Canada  would 
prevent  Societies  of  the  United  States  from  thereafter  securing  permission  to  operate 
in  the  Dominion. 


42 

Mr.  James  E.  Shepard  read  a  paper  on  British  Friendly  Societies  which  should 
have  had  serious  consideration  and  should  have  served  as  a  lesson  to  fraternal  man- 
agers. It  appears  to  have  made  no  immediate  impression.  The  concluding  paragraph, 
had  it  been  applied  to  the  Fraternal  Orders  and  heeded,  would  have  saved  a  world 
of  trouble.  It  follows  : 

There  are  societies  full  of  erroneous  features.  The  first,  and  perha'ps  the  most 
important,  is  the  inadequacy  of  the  rates  of  contribution  demanded  from  members. 
The  rates  have  apparently,  in  most  instances,  been  calculated  not  so  much  after 
consideration  of  the  value  of  the  risks  incurred  as  with  the  desire  to  frame  a  scale 
of  subscriptions,  which,  from  its  liberality,  would  be  likely  to  become  popular.  A 
society  will  sell  for  threepence  a  week  benefits  that  in  reality  should  be  rated  at 
sixpence;  hence  bankruptcy  is,  sooner  or  later,  inevitable.  Nor  is  the  case  thus  sup- 
posed by  any  means  extreme  or  rare.  .  .  .  Trusting  to  the  so-called  profit  from 
secession  (lapses)  it  is  deemed  sufficient  if  the  society  pays  its  way,  and  if  the  claims 
for  sickness  are  not  more  than  the  total  premiums  received — no  margin,  or  but  little, 
remaining  to  be  invested  as  a  provision  for  future  years. 

I  have  stated  that  the  general  laws  for  the  control  of  Fraternal  Beneficiary  Societies 
were  enacted  in  New  York  and  Massachusetts  in  1888. 

The  first  Uniform  Bill,  with  the  sanction  of  the  National  Fraternal  Congress, 
became  a  law  in  Michigan  in  1893,  exactly  100  years  after  the  first  Act  of  Parliament 
in  relation  to  Friendly  Societies. 

The  provisions  of  this  Uniform  Bill  are  in  striking  contrast  with  the  utterances 
heretofore  quoted  from  the  proceedings  of  the  Congress.  Then  it  was  contended  that 
State  legislation  was  neither  necessary  nor  desirable.  At  the  seventh  Session  of  the 
Congress  at  Cincinnati  in  November,  1893,  we  have  the  unanimous  adoption  of  a 
recommendation  to  secure  the  enactment  of  the  Uniform  Bill  by  States  having  no  laws 
relating  to  Fraternal  Societies. 

During  1893  the  States  of  Michigan,  Illinois  and  New  Jersey  enacted  into  law 
(with  some  modifications  and  changes)  the  Uniform  Bill  prepared  in  1892  by  the 
Committee  on  Legislation. 

The  State  of  Maine  eliminated  from  its  laws  the  authority  of  endowment  societies 
to  transact  business,  while  New  Jersey  continued  such  authority.  The  Maine  law 
(Section  3,  Chapter  234)  was  otherwise  amended. 

A  law  was  enacted  in  Pennsylvania  which  was  little  more  than  a  definition  of  a 
Fraternal  Society  and  exemption  of  such  Society  from  the  general  insurance  laws. 
An  annual  statement  of  the  usual  form  was  required. 

The  eighth  Annual  Session  of  the  National  Fraternal  Congress  was  held  at  Buffalo 
in  November,  1894.  I  quote  from  President  N.  S.  Boynton's  address  to  show  that 
some  leaders  were  not  in  sympathy  with  the  progress  made  after  1890: 

Your  President  has  been,  and  is  now,  considered  quite  radical  in  some  of  his 
views,  particularly  in  regard  to  the  objects  and  purposes  of  Fraternal  Beneficiary 
Societies  and  the  necessity  for  drawing  the  lines  closely  between  the  various  systems 
of  life  protection,  and  no  doubt  some  go  so  far  as  to  say  that  he  is  a  "crank"  in  that 
respect.  Well,  possibly  the  appellation  is  not  out  of  place,  and  I  accept  it  good 
naturedly. 

After  a  trial  of  two  or  more  years  to  secure  uniform  legislation,  I  have  about 
come  to  the  conclusion  that  we  made  a  mistake  in  framing  a  Uniform  Bill  which  places 
our  Fraternal  Beneficiary  Societies  under  the  supervision  of  the  insurance  departments 
in  the  different  States.  Not  that  I  am  adverse  to  State  supervision,  but  because  I 
think  it  ought  to  be  done  by  some  official  other  than  the  Insurance  Commissioner, 
even  if  such  an  office  had  to  be  created  for  that  special  work.  We  ought  to  be 


43 

entirely  divorced  from  the  speculative,  cold  business  associations.  So  long  as  the 
voluntary  beneficial  associations  are  even  indirectly  associated  with  the  other  sys- 
tems, just  so  long  will  they  be  looked  upon  as  a  part  and  parcel,  or  at  least  as  an 
auxiliary,  of  the  old  line  companies. 

Now,  let  me  draw  the  lines  clearly  and  distinctly  so  there  can  be  no  mistake.    . 

At  each  session  since  this  Congress  was  formed  the  matter  of  uniform  State 
legislation  has  been  a  subject  of  earnest  discussion.  While  in  nearly  every  State  they 
were  exempt  from  the  operations  of  the  insurance  laws,  it  was  conceded  that  they 
should  come  under  some  kind  of  State  supervision  as  a  protection  to  themselves  and 
prevent  our  societies  from  being  classed  with  a  large  number  of  so-called  fraternal 
bodies  or  associations  organized  for  speculative  purposes. 

The  lines  of  demarcation  between  the  three  systems  are  clear  and  distinct  and 
should  be  kept  so  in  all  legislative  enactments. 

The  objects  of  these  Fraternal  Orders  or  Associations,  as  incorporated  in  their 
fundamental  laws,  will  be  found  substantially  as  follows : 

First. — To  unite  fraternally  all  persons  of  sound  bodily  health  and  good  moral 
character  who  are  socially  acceptable,  etc. 

Do  the  insurance  and  assessment  companies  provide  for  this? 

Second.— To  give  all  moral  and  material  aid  in  its  power  to  the  members  and  those 
dependent  upon  them. 

Do  the  two  other  systems  do  this  ? 

Third. — To  educate  the  members  socially,  morally  and  intellectually. 
Do  you  find  this  object  in  the  laws  of  the  other  systems? 

Fourth.— To  create  a  fund  for  the  relief  of  sick  and  distressed  members,  and  to 
care  for  the  living  and  bury  the  dead. 
Do  the  other  systems  provide  for  this? 

Fifth. — To  establish  a  benefit  fund  or  funds  from  which,  on  satisfactory  evidence 
of  the  death  of  a  beneficial  member  of  the  Order  who  has  complied  with  all  its  lawful 

requirements,  a  sum  not  exceeding dollars  to  be  paid  to  the  beneficiary 

of  such  member,  as  he  shall  direct,  and  as  the  laws  of  the  Order  shall  provide,  and 
upon  the  total  and  permanent  disability  of  a  beneficial  member,  either  as  a  result  of 
disease,  accident  or  old  age,  who  may  be  in  good  standing  with  the  Order  at  the  time 
of  the  incurrence  of  such  a  total  and  permanent  disability,  such  sum  of  money  and  in 
such  manner  as  may  be  fixed  in  the  laws  of  the  Order. 

Do  the  purely  business  corporations  provide  for  such  protection? 

Sixth. — To  establish  a  fund  or  funds  to  pay  such  sick,  funeral  and  accident  benefits 
as  its  laws  may  provide. 

Do  the  insurance  companies  establish  such  funds? 

The  laws  of  the  National  Fraternal  Congress,  representing  the  legitimate  fraternal 
beneficiary  system  of  this  country,  define  what  societies  may  be  represented  therein, 
as  follows : 

Now,  I  hold  that  the  fraternal  system  is  entirely  different,  separate  and  distinct 
from  the  old  line  or  level  premium  system  and  the  open  business  assessment  system. 
Only  those  societies,  corporations  or  associations  organized  and  carried  on  for  the 
sole  benefit  of  their  members  and  beneficiaries,  not  for  profit  and  gain,  can  be  classed 
as  legitimate  Fraternal  Beneficiary  Orders. 

The  mutual  agreement  between  the  fraternal  society  and  the  member  is  not  a  policy 
or  contract  like  that  entered  into  between  a  life  insurance  company  and  its  policy- 
holder.  The  fraternal  societies  simply  issue  a  certificate  of  membership  in  which  the 
member  agrees  to  comply  with  all  laws,  rules  and  regulations  in  force  at  the  time  he 
becomes  a  member,  and  with  all  changes  in  the  laws,  etc.,  that  may  be  made  during 
his  membership. 

The  fraternal  beneficiary  system  makes  no  contract  of  insurance  with  its  mem- 
bers in  the  common  business  acceptation  of  the  term  "insurance."  Nowhere  in  the 
objects  and  purposes  or  the  fundamental  laws  of  the  associations  composing  the 
national  fraternal  beneficiary  system,  or  the  laws  governing  the  National  Fraternal 
Congress  representing  this  system,  can  the  terms  "Policy"  or  "Insurance"  be  found. 

As  I  have  said  heretofore,  and  now  reiterate,  very  few  of  the  members  and  many 


44 

of  the  officers  of  Fraternal  Benefit  Societies  realize  that  the  great  benevolent  co- 
partnerships or  associations  to  which)  they  belong,  simply  furnish  them  pecuniary  aid 
in  case  of  disability  arising  from  sickness,  disease,  accident  or  old  age,  and  their 
families  protection  or  a  certain  competency  in  the  event  of  their  death.  They  are  not 
insured  nor  furnished  insurance. 

With  this  widespread  misunderstanding  of  the  objects,  aims  and  purposes  of  the 
Fraternal  Beneficiary  Orders  among  their  officers,  members  and  journals,  is  it  any 
wonder  that  our  legislators  look  upon  our  societies  as  cold,  business  corporations, 
covered  by  a  gauzy  fraternal  mantle,  and  will  it  not  account  for  the  difficulty  experi- 
enced heretofore  by  the  Orders  through  the  National  Fraternal  Congress  to  secure 
favorable  legislation,  both  in  the  State  Legislatures  and  in  the  United  States  Congress? 

The  forward  movement  could  not  be  stopped,  and  President  Boynton's  rather 
antagonistic  position  was  not  accepted  as  the  true  attitude  of  the  majority.  This  is 
clearly  indicated  by  the  special  report  of  the  Committee  on  Statistics  and  Good  of  the 
Orders  to  which  his  address  had  been  referred.  And  this  reference  culminated  in 
other  special  reports  by  that  Committee  which  have  revolutionized  the  business  of 
Fraternal  Beneficiary  Societies  and  resulted  in  radical  legislation  in  relation  to  con- 
tribution rates  and  valuation. 

In  1894  the  Uniform  Bill  was  passed  by  both  houses  of  the  Legislature  of  Iowa, 
but  was  vetoed  by  the  Governor.  An  unsatisfactory  bill  was  defeated  in  Maryland. 
The  Congress  made  some  changes  in  its  draft  of  the  Uniform  Bill,  but  not  material  to 
its  important  provisions. 

In  1895  a  new  draft  of  the  Uniform  Bill  was  submitted  to  the  Congress  at  its 
Ninth  Annual  Session  in  Toronto.  The  changes  were  not  of  sufficient  importance  to 
justify  recording  in  this  history  of  legislation. 

The  most  important  and  far-reaching  movement  ever  taken  by  the  Congress  had 
its  inception  at  the  Ninth  Annual  Session  in  a  Special  Report  submitted  by  the  Com- 
mittee on  Statistics  and  Good  of  the  Orders,  which  was  incidentally  the  result  of  the 
Committee's  report  in  1894  on  President  Boynton's  address.  This  Special  Report  was 
of  such  grave  import  that  it  was  read  and  considered  in  executive  session,  behind 
closed  doors  and  without  the  stenographer.  For  four  hours  there  was  heated  dis- 
cussion and  then  an  adjournment  until  the  following  day.  After  further  consideration 
in  executive  session  the  only  action  was  "to  continue  consideration  of  the  subject 
matter  for  the  ensuing  year  and  make  report  to  the  Congress  at  its  next  stated 
meeting." 

I  quote  from  the  Special  Report : 

In  the  beginning  of  these  Orders  we  proceeded  on  a  theory  that  we  mistakenly 
and  without  experience  assumed  to  be  an  established  fact,  and  it  has  until  lately  been 
accepted  as  sound,  that  through  the  process  of  additions  and  lapses  a  standard  of 
average  age  could  be  secured  and  maintained  that  should  not  increase  as  an  Order 
was  longer  and  longer  in  business.  It  has  been  evident  to  many  that  this  theory  was 
untenable,  and  in  order  to  clearly  demonstrate  that  the  change  in  view  was  demanded 
of  all  in  interest  and  could  not  longer  be  safely  ignored,  your  committee  prepared  a 
special  blank  for  the  use  of  the  societies  from  which  the  data  necessary  to  the  proper 
understanding  of  prevailing  conditions,  that  prove  the  theory  unsound,  might  be  readily 
attainable  and  will  appear  in  tabular  form  asi  a  part  of  this  report. 

Analysis  of  the  table  leads  to  the  inevitable  conclusion  that  barring  merely  the 
inceptive  period  of  an  Order,  when  conditions  more  or  less  abnormal  prevail,  that  there 
exists  a  gradual  and  very  general  increase  in  the  mortuary  rate  wholly  due  to  the 
increasing  average  of  age,  or,  in  other  words,  the  greater  maturity  of  lives.  In  short, 
comparing  the  "Theory"  and  the  "Result,"  we  come  to  the  inevitable  conclusion  that 
the  one  has  no  relation  to  the  other  and  that  administration  based  on  "Theory"  must 
give  place  to  government  by  "Fact." 


45 

We  believe  that  the  existing  Fraternal  Orders  can  be  perpetuated  provided  they 
heed  the  lesson  and  the  warning  that  the  experience  of  the  past  so  plainly  gives  and 
teaches. 

As  the  object  of  this  reference  was  to  devise,  if  possible,  a  plan  of  procedure  that 
should  be  best  for  all  concerned,  it  is  proper  to  say  here  that,  while  the  Fraternals 
proceed  on  the  same  general  line  in  prosecution  of  their  work,  there  are  so  many 
different  methods  of  management  that  a  rule  applying  to  one  would  not  apply  to 
another,  and  an)'  general  rule  must  either  be  modified,  and  thus  in  part  nullified,  to 
meet  the  requirements  of  our  variance  in  administration,  or  our  varying  plans  must 
be  brought  to  some  common  agreement.  Here  lies  the  first  difficulty. 

It  is  indispensable  to  recognize  the  Law  of  Mortality  as  the  governing  factor.  If 
this  be  admitted,  safety  demands,  if  the  Benefit  be  a  fixed  sum,  that  the  contribution 
or  rate  should  be  graded  to  age,  or,  in  other  words,  to  the  risk  of  dying,  so  as  to 
conform  to  that  Law ;  or  if  the  rate  of  contribution  be  flat  or  graded  at  age  at  entry 
to  be  maintained  during  life,  then  Equity  demands  that  the  Benefit  should  be  graded 
proportionally  to  time  of  continuance  or  such  other  modification  made  as  shall  be 
fair  and  just  in  bringing  contribution  and  return  to  their  proper  portion. 

The  rate  fixed  for  life  at  the  age  of  entry  is  common  to  nearly  all  the  Fraternal 
Orders.  Our  experience  demonstrates  that  it  is  faulty  in  theory,  unsound  in  practice 
and  should  be  remedied,  and  this  can  be  accomplished  by  increasing  the  rate  with 
increasing  age  or  by  so  adjusting  the  rates  as  to  establish  a  fund  that  shall  equalize 
the  cost  throughout  life,  or,  in  other  words,  establish  a  Reserve.  If  with  our  experi- 
ence we  should  institute  a  new  Fraternal  Order  at  the  present  time,  one  or  the  other 
of  these,  the  law  permitting,  perhaps  more  or  less  modified,  but  in  substance  the  same, 
would  probably  be  adopted.  In  the  proposition  advanced  the  elements  of  "Safety"  and 
"Equity"  are  separated,  and  first  to  be  considered  is  the  element  of  "Safety." 

Loading  the  rate  at  age  of  entry  to  minimize  the  cost  of  advancing  years  is  the 
Old  Line  Plan  of  the  reserve.  The  establishment  of  such  a  fund  has,  until  within  a 
year  or  two,  been  generally  condemned  by  the  Fraternal  Orders,  not  for  the  reason 
that  it  is  not  of  itself  good,  but  that  it  has  been  improperly  administered  and  made  a 
means  of  gravest  abuse. 

Properly  adjusted  to  our  requirements,  it  would  make  protection  certain,  work 
wrong  to  no  man  and  be  in  the  direct  line  of  safety. 

Any  table  based  on  this  plan  must  be  accurately  worked  out  and  grounded  on  the 
condition  of  a  fixed  annual  amount  payable  by  installment,  of  which  a  certain  per  cent, 
with  its  increment  of  interest,  will  form  a  reserve  fund.  This  reserve  can  very  safely 
be  largely  reduced  from  the  reserve  based  on  the  standard  tables.  It  would  be 
subject  to  this  disadvantage  that  it  would  go  beyond  the  limit  of  what  Fraternal  Orders 
may  do  in  certain  States,  and  in  these  States  additional  legislation  would  be  required. 
It  would  undoubtedly  bring  us  more  under  supervision,  would  increase  the  cost  of 
management,  require  larger  contributions  in  the  beginning  to  the  Benefit  Fund  and 
lay  us  open  to*  the  unfounded  but  plausible  objection  that  we  had  departed  from  our 
original  purpose,  but,  despite  these  drawbacks,  would  be  right  in  line  with  the  best 
interest  of  every  member  of  every  Fraternal  Order. 

The  step  rate  might  be  so  modified  and  arranged  by  adjusting  and  increasing  each 
advancing  term  to  age  when  the  rate  would  become  such  a  burden  as  to  be  intol- 
erable that  the  accumulations  would  then  take  care  of  the  excessive  cost  of  the  future. 
In  this  way  the  step  rate  and  reserve  plan  would  be  combined  and  the  best,  features  of 
each  secured. 

In  approaching  the  matter  of  an  equitable  rate  that  should  not  burden,  and  yet 
should  make  certain,  your  committee  cannot  bring  to  its  consideration  the  scientific 
skill  of  the  trained  actuary,  but  they  venture  to  present  in  this  line  some  of  the  features 
of  the  reserve  and  the  effects  it  will  produce  based  upon  varying  conditions.  The 
partial  tables  independently  presented  are  substantially  mathematically  correct  and 
can  be  worked  out  in  full  with  little  expenditure  of  time  and  effort.  Into  them  enter 
two  elements  that  cannot  be  ignored,  namely,  the  natural  cost  and  the  increment  of 
interest  on  the  amount  paid  to  the  Reserve,  the  amount  contributed  to  the  Reserve 
being  modified  to  meet  some  of  the  many  objections  brought  against  it. 

Possibly  .further  modifications  might  be  made  in  the  direction  of  smaller  cost  and 
greater  returns. 

The  second  clause  of  the  proposition  will  require  but  brief  consideration.     If  some 


46 

plan  is  not  provided  so  as  to  fully  provide  for  the  safety  of  the  member,  then  Equity 
demands  that  contribution  and  return  shall  be  proportionately  adjusted.  If  the  rates 
now  paid  cannot  be  raised  (and  as  at  present  established  is  not  sufficient  to  provide 
for  the  payment  of  the  certificate  in  full  without  injustice  to  other  members)  there 
remains  but  one  remedy  within  our  reach,  and  that  is  to  reduce  the  promise  of  per- 
formance to  a  just,  honorable  and  true  fraternal  ratio  with  contribution.  Should  this 
plan  be  attempted,  there  is  to  be  considered  what  is  a  proper  reduction,  and  as  it  is  a 
matter  of  proportion  merely  that  can  be  readily  ascertained,  it  seems  to  require  no 
particular  demonstration  at  this  time. 

Your  Committee  have  not  labored  under  the  delusion  that  what  they  might  offer 
would  be  the  best,  or  that,  provided  it  were  the  best  and  most  practical,  that  existing 
Orders,  even  if  they  would,  could  make  the  radical  changes  that  the  adoption  of  a  new 
plan  would  require. 

We  are  too  long  established,  our  number  too  great,  our  membership  too  little 
instructed  and  too  firmly  convinced  that  the  cheapness  of  the  old  way  will  always 
prevail  to  be  readily  changed,  and  it  may  not  foe  rash  to  intimate  that  possibly  there 
are  some  in  this  body  who  are  but  partially  convinced  of  the  necessity  of  any  change 
whatever. 

Your  Committee  would  earnestly  urge  that  whatever  change  be  attempted  at  any 
time  in  the  future  it  shall  be  one  that  shall  be  effective  in  curing  the  evil  to  which  it 
applies  and  not  such  a  one  as  merely  replaces  one  ill  with  another,  perhaps  in  time 
to  be  more  unendurable  than  the  original.  Any  change  must  be  reasonable  and  wise, 
and  if  such  cannot  be  brought  about,  then  we  should  attempt  none,  for  an  unwise  and 
defective  effort  would  of  itself  work  very  grave  injuries.  As  our  formative  period 
has  passed,  the  educational  period  now  succeeding  it  should  be  the  object  of  our 
united  efforts,  and,  when  education  has  sufficiently  advanced,  then  the  changes  needed 
will  come  without  shock  or  jar  to  the  system.  The  ills  now1  known  and  appreciated 
by  the  few  will  in  the  school  of  experience  be  fully  known  to  the  many,  and  with 
adjusted  and  equalized  contribution  and  return  we  shall  enter  upon  a  phase  of  exist- 
ence that  shall  go  as  far  beyond  what  we  have  heretofore  done,  as  what  we  have  here- 
tofore accomplished  is  in  advance  of  what  we  were  twenty  years  ago.  What  your 
Committee  have  attempted  is  to  present  certain  matters  as  directing  merely  along  an 
educational  line. 

Is  it  too  much  to  say  that  if  experience  teaches  that  changes  are  necessary  and 
such  changes  are  not  made  because  of  prejudice,  lack  of  appreciation  or  an  undue 
sense  of  security  based  upon  the  plausible  but  untenable  theory  that  what  has  been 
will  continue  to  be,  then  the  law  of  the  survival  of  the  fittest  will  produce  its  natural 
and  inevitable  results? 

The  Special  Report  was  signed  by  J.  E.  Shepard,  D.  E.  Stevens  and  H.  A.  Warner. 

At  the  Tenth  Annual  Session  of  the  Congress  in  Louisville,  November,  1896,  the 
Committee  on  Statistics  and  Good  of  the  Orders  made  a  second  Special  Report,  which 
was  signed  by  J.  E.  Shepard,  D.  P.  Markey,  D.  E.  Stevens,  B.  F.  Nelson,  H.  A.  Warner, 
F.  L.  Brown  and  E.  R.  Hutchins. 

In  this  report  facts  and  figures  were  presented  to  support  the  general  allegations 
of  the  insufficiency  of  existing  contribution  rates  to  provide  for  promised  benefits. 
I  limit  quotations  to  a  few  excerpts : 

Age  can  have  but  one  result,  and  here  is  found  the  greatest  factor  of  increased 
cost.  It,  in  fact,  dominates  our  plan. 

As  a  chain  is  only  as  strong  as  its  weakest  part,  so  may  we  not  say  that  the 
strength  of  the  Fraternal  System;  as  a  whole  is  as  strong  as  its  weakest  part ;  and,  if 
so,  should  not  its  weakness  rather  than  its  strength  be  considered? 

To  some  of  us  already  comes  a  condition  which  we  believe  has  been  brought  about 
by  the  full  and  natural  effect  of  what  we  have  endeavored  to  point  out  as  a  menacing 
danger  to  us  all  which  might  and  could  have  been  avoided  in  great  part  had  we  wisely 
provided  against  it  in  the  beginning.  Your  Committee  have  taken  much  time  in  dem- 
onstrating matters  of  very  easy  attainment  and  common  knowledge  and  now  beg  to 
offer  for  your  consideration  another  and  just  as  potent  factor  of  evil,  just  as  well 


47 

known  to  us  all,  just  as  little  heeded  and  entirely  in  our  control,  towit,  our  attempt 
to  outdo  to  so  great  an  extent  every  form  of  insurance  or  protection  heretofore 
devised ;  and,  while  so  attempting,  give  no  heed  to  maxims  of  prudence  or  show  any 
inclination  to  take  advantage  of  experience  of  others  and  in  so  doing  be  enabled  to 
shun  the  evils  which  came  to  their  knowledge  through  this  same  experience  that  we 
quote,  generally  cast  aside  with  contempt. 

Your  Committee,  in  closing,  desire  to  say  that  they  endorse  as  sound  the  con- 
clusions embraced  in  the  Special  Report  made  at  Toronto  and  would  supplement  it 
by  saying  here  that,  in  their  opinion,  there  is  no  better,  and  certainly  no  safer,  time 
to  reform  our  plan  than  now,  if  it  can  be  attempted  on  right  lines,  for  a  reform 
attempted  in  other  than  the  right  direction  would  be  no  reform  at  all  and  would  work 
a  double  disaster. 

We  have  in  combination  two  elements  in  chief  with  which  we  must  contend :  First — 
An  increasing  liability  because  of  an  ever  increasing  mortuary  rate  which  may  be  to 
a  great  extent  modified  and  held  in  check  for  a  longer  or  shorter  time  by  a  large 
increase  in  membership — and  again  arises  the  question,  does  anyone  claim  the  neces- 
sary increase  can  always  be  maintained  ?  Second — Art  improper  rate  of  contribution 
and  return  by  which  the  present  draws  upon  the  future  to  an  unjustifiable  extent.  The 
first  is  partly,  the  second  wholly,  in  our  control.  Neither  of  these  can  be  entirely 
remedied  by  increasing  the  frequency  of  assessments  or  by  any  method  that  shall 
leave  the  cause  unchanged. 

The  gross  inequality  between  contribution  and  return  must  be  properly  adjusted. 
A  general  move  should  at  once  begin  to  educate  all  our  members  to  a  full  realization 
of  the  fact  that  impossibilities,  even  if  labeled  "Fraternal,"  are  still  "Impossibilities." 

The  greatly  enhanced  liability  of  the  future  must  in  some  way  be  provided  for  or 
guarded  against  in  the  present.  The  old  member  who  will  be  first  to  protest  at  any 
change  in  his  rate  must  be  brought  to  realize  that  any  change  in  the  right  way  is  in 
the  direct  line  of  his  protection  first  of  all. 

In  bringing  their  work  to  an  end  your  Committee,  from  the  facts  and  data  which 
have  come  to  them  and  which  they  in  part  have  submitted  in  this  report,  do  unani- 
mously recommend  to  this  Congress  that  as  the  representative  of  our  Fraternal  System 
ir  shall  declare  that  it  is  the  imperative  duty  of  the  several  Orders  represented  here 
to  make,  at  the  earliest  practical  date,  proper  provisions  for  meeting  the  inevitable 
increase  in  the  rate  of  mortality  by  an  adjustment  of  rates  so  that  contribution  shall 
be  equitably  proportioned  to  the  hazard  at  risk. 

This  second  Special  Report  was  also  considered  in  executive  session  and  finally 
referred  back  to  the  Committee  for  further  investigation  with  instruction  to  make  a 
third  report  in  1897.  On  motion  of  Dr.  Oronhyatebeha,  the  Committee  were  further 
instructed  "to  prepare  and  present  to  the  next  Congress  such  plans  or  systems  of 
fraternal  beneficiary  protection  that  seem  to  them  best  adapted  to  the  establishment 
of  permanent  fraternal  protection  at  the  lowest  possible  cost." 

Supplemental  to  its  Special  Report  the  Committee  gave  the  plans  upon  which  the 
Ancient  Order  of  United  Workmen  and  the  National  Reserve  Association  had  re- 
rated,  and  the  plan  proposed  for  the  Royal  Arcanum  to  be  acted  upon  in  1897. 

The  general  statements  by  the  Committee  are  clear-cut,  comprehensive  and  correct 
expositions  of  sound  insurance  principles,  and  they  are  supported  by  unquestioned  facts 
from  the  actual  experience  of  Societies  which  were  members  of  the  Congress.  The 
presentation,  supplemented  by  the  more  direct  and  concrete  reports  of  1897  and  1898, 
convinced  those  who  attended  the  sessions  of  the  Congress  and  culminated  in  the  con- 
struction and  publication  of  the  National  Fraternal  Congress  Table  of  Mortality  and 
contribution  rates  deduced  therefrom.  But  the  educational  effect  contemplated  by  the 
Committee  did  not  materialize  in  so  far  as  the  membership  at  large  were  concerned. 
Besides  this  there  developed  serious  differences  between  the  officials  and  managers, 
even  between  associate  officers  in  the  same  Society,  and  from  1900  to  the  present 
writing  an  almost  continual  internecine  (or  maybe  more  properly  fratricidal)  warfare 


48 

has  been  waged  between  officials  of  different  Societies  or  between  officials  and  mem- 
bers of  the  same  Societies.  But  in  the  midst  of  this  conflict  educational  progress  has 
been  made  as  will  appear  in  the  continuation  of  this  history. 

The  Committee  on  Statutory  Legislation  reported  to  the  Congress  in  1896  that 
the  year  had  been  fruitful  in  gain  to  the  cause  of  uniformity  in  legislation.  The 
Uniform  Bill  had  been  enacted  into  law  in  Ohio  and  Iowa,  and  objectionable  bills 
had  been  defeated  in  the  State  of  Maryland  and  the  Province  of  Quebec. 

The  Eleventh  Annual  Session  of  the  National  Fraternal  Congress  convened  in 
Port  Huron,  October  15,  1897.  This  meeting  is  of  particular  interest  to  the  student, 
and  I  regret  that  space  will  not  permit  the  republication  of  the  many  valuable  papers 
and  reports  which  were  presented  and  the  discussion  that  followed. 

There  was  the  spirit  of  reform  everywhere,  even  in  the  atmosphere.  A  few 
adhered  to  the  oldi  tenets  and  sounded  a  note  of  warning  of  the  wrath  to  come,  but 
the  Committee  on  Statistics  and  Good  of  the  Orders  had  inaugurated  a  movement 
that  was  not  to  be  checked  short  of  revolution.  D.  P.  Markey,  Chairman,  immedi- 
ately the  Congress  organized  for  business,  offered  a  resolution  for  his  Committee : 

Resolved,  That  the  incoming  President  of  this  Congress  be  requested  to  appoint  a 
Special  Committee  of  three  to  prepare  minimum  tables  of  rates  upon  the  level  and  step 
rate  plans  and  any  modifications  of  the  same  which  may  seem  to  them  desirable  and 
commensurate  with  safety,  and  that  said  Committee  report  at  the  next  session  of 
this  Congress. 

Resolved,  That  this  Committee  be  authorized  to  employ  actuarial  assistance  at  an 
expense  not  to  exceed  five  hundred  dollars. 

D.  P.  MARKEY,  Chairman. 

D.  E.  STEVENS. 

B.  F.  NELSON. 

DR.  H.  A.  WARNER. 

DR.  E.  R.  HUTCHINS. 

JULIUS  M.  SWAIN. 

J.  G.  TATE. 

F.  A.  DRAPER. 

F.  W.   SEARS. 

W.  T.  WALKER. 

Mr.  Powers,  of  Illinois,  immediately  thereafter  presented  the  following  preamble 
and  resoution  and  asked  that  it  be  considered  in  connection  with  the  pending  res- 
olutions 

WHEREAS,  At  the  last  session  of  this  Congress  a  resolution  was  unanimously  adopted 
in  which  it  was  declared  to  be  the  "imperative  duty  of  the  several  Orders  represented 
here  to  make,  at  the  earliest  practical  date,  proper  provision  for  meeting  the  inevitable 
increase  in  the  rate  of  mortality  by  an  adjustment  of  rates  so  that  contribution  shall 
be  equitably  proportioned  to  the  hazard  at  risk";  and, 

WHEREAS,  The  very  able  report  of  the  Committee  on  Statistics  and  all  the  papers 
read  before  this  Congress  clearly  indicate  that  it  is  the  duty  of  this  Congress  to  not  only 
reaffirm  its  declaration  of  one  year  ago,  but  also  to  urge  immediate  action  by  the 
Societies  in  the  direction  of  safety  and  perpetuity;  therefore,  be  it 

Resolved,  That  it  is  the  sense  of  this  Congress  that  all  of  the  Societies  here  rep- 
resented should  immediately  adopt  such  tables  of  assessments  and  changes  in  their 
laws  as  will  provide  ample  income  to  meet  both  present  and  future  mortuary  demands, 
and  a  safe  plan  for  investment  of  such  accumulations  as  will  insure  the  perpetuity  of 
the  organization. 

On  motion,  action  upon  the  above  resolutions  was  postponed  for  the  present  in 
order  that  they  might  be  printed. 


49 

On  the  following  day  Past  President  Spooner  proposed  substitutes  for  both  reso- 
lutions, which  were  adopted,  as  follows : 

Resolved,  That  the  incoming  President  of  this  Congress  be  requested  to  appoint  a 
Special  Committee  of  three  to  prepare  tables  of  rates  upon  the  level  premium,  the 
natural  premium.'  or  step  rate  plan,  and  the  step  rate  plan  with  such  modifications  by 
applying  to  a  proper  extent  the  principles  of  a  reserve  or  emergency  fund. 

Said  Committee  shall,  so  far  as  possible,  secure  and  present  to  this  Congress  a 
comprehensive  statement  of  the  remedial  changes  which  have  been,  or  shall  in  the 
ensuing  year  be,  adopted  by  any  Fraternal  Order,  the  object  herein  sought  ,being  the 
securing  of  such  knowledge  as  shall  be  of  value  to  this  Congress  in  arriving  at  definite, 
safe  and  sound  conclusions. 

WHEREAS,  At  the  last  session  of  the  Congress  a  resolution  was  unanimously  adopted 
in  which  it  was  declared  to  be  the  "imperative  duty  of  the  several  Orders  represented 
here  to  make,  at  the  earliest  practical  date,  proper  provision  for  meeting  the  inevitable 
increase  in  the  rate  of  mortality  by  adjustment  of  rates  so  that  contribution  shall  be 
equitably  proportioned  to  the  hazard  at  risk" ; 

Resolved,  That  this  Congress  hereby  reaffirms  its  declaration  of  one  year  ago. 

John  Haskell  Butler,  Chairman  of  the  Committee  on  Statutory  Legislation,  presented 
a  lengthy  and  comprehensive  report,  from  which  I  extract  the  following : 

Substantial  gain  has  been  made  in  extending  the  -operation  of  the  Uniform  Congress 
Act. 

Our  Uniform  Law  has  during  the  year  been  adopted  in  the  States  of  Missouri  and 
Nebraska  and  by  the  National  Congress  as  legislation  for  the  District  of  Columbia. 

Even  this  progress,  by  no  means  satisfying  the  full  measure  of  the  wish  and 
expectation  of  your  Committee,  was  made  only  by  the  most  diligent  effort  and  in  the 
face  of  serious  opposing  influences. 

In  Missouri  and  the  District  of  Columbia  modifications  of  our  Uniform  Bill  were 
yielded. 

The  following  clause  was  inserted  in  the  Acts  adopted : 

"Any  such  Fraternal  Beneficial  Association  may  create,  maintain,  disburse  and  apply 
a  reserve  or  emergency  fund  in  accordance  with  its  Constitution  or  By-Laws." 

This  was  done  not  only  because  of  a  demand  therefor,  which,  if  refused,  might  have 
jeopardized  success  in  obtaining  the  enactment  of  the  law,  but,  in  vieiv  of  the  possibility, 
not  to  say  probability,  that  many  of  the  fraternities  noiv  associated  in  the  Congress  may, 
in  the  near  future',  adopt  reserve  fund  provisions,  it  seems  wise  that  statutory  per- 
mission therefore  should  exist. 

The  Committee  ask  that  their  action  in  this  respect  be  endorsed,  and  recommend 
that  the  Uniform  Bill  be  amended  by  adding  this  same  provision  to  the  end  of  Sec- 
tion i. 

The  Missouri  Bill  also  limits  the  right  of  the  Commissioner  to  make  inquiries  out- 
side the  special  questions  in  the  Act,  to  the  statements  in  the  Orders'  reports  to  the 
department,  and  we  recommend  the  Uniform  Bill  be  amended  accordingly. 

Although  the  field  to  which  this  particular  statute  is  applicable  is  not  extensive, 
it  is  believed  that  the  fact  that  it  was  thus  favorably  regarded  by  the  law-makers  in 
the  National  Congress,  representing  all  the  States,  would  very  materially  assist  in 
gaining  for  us  recognition  in  those  States  where  we  are  yet  seeking  legislation. 

In  the  State  of  New  York  some  vicious  attempts  were  defeated  and  a  good  amend- 
ment secured. 

In  Wisconsin  the  Insurance  Codification  prepared  by  the  Commissioner  and  a 
special  commission  appointed  for  the  purpose,  in  its  application  to  our  system  was  so 
objectionable  to  fraternal  interests  that  all  who  examined  it  must  have  deeply  felt  that 
it  must  not  become  law. 

Not  to  speak  of  all  its  features,  that  it  should  have  grouped  all  classes  of  com- 
panies furnishing  protection  on  the  assessment  plan  within  the  same  general  pro- 
visions, was  sufficient  to  condemn  it. 

We  have  been  and  should  continue  to  be  tenacious,  of  having  all  laws  govern- 


50 

ing  fraternals  embraced  in  one  Act.  There  will  then  be  no  fear  of  the  unexpected 
application  of  adverse  requirements. 

Notwithstanding  the  appeals  to  the  Commissioner  to  endorse  our  Uniform  Bill, 
he  held  rigidly  to  his  own  ideas,  and  pushed  them  with  zeal  and  ability.  It  became 
necessary  to  resist  with  vigor.  The  value  of  combined  effort  and  the  solidifying  in- 
fluence of  the  association  of  fraternities  in  this  Congress  has  never  been  so  grandly 
displayed  as  in  the  defeat  of  this  measure. 

Colorado  is  another  State  wherein  a  hostile  attack  was  made.  A  measure  was 
introduced,  designed,  among  other  details,  to  require  a  deposit  of  money  by  the  Orders 
doing  business  there.  A  splendid  rally  was  made  and  the  proposition  met,  as  it  de- 
served, ignominious  failure. 

The  legislation  in  the  Province  of  Quebec  remains  unchanged.  The  Provincial 
authorities  are  not  inclined  to  insist  upon  compliance  with  its  provsions.  They  are 
investigating  the  subject  of  legislation  adapted  to  the  fraternal  system  with  care. 
It  is  believed  that  before  the  authorities  decide  upon  any  further  recommendations, 
ample  opportunity  will  be  accorded  us  to  present  our  views. 

The  Congress  Bill  was  introduced  in  Kansas,  and  little  doubt  was  entertained  that 
it  would  pass.  A  notion  obtained,  however,  among  the  legislators  that  only  repre- 
sentatives should  legislate  in  our  governing  bodies,  and  that  life  membership  and  the 
conservative  and  preservative  power  of  the  official  boards  was  injurious.  It  was  the 
opinion  of  those  in  charge  of  the  bill  that  an  attempt  to  carry  it  would  result  in  having 
it  so  amended.  It  was  therefore  wisely  abandoned. 

The  legislation  in  New  Jersey  was  not  important  as  affecting  our  class  of  asso- 
ciations. 

Adverse  legislation  was  offered  in  Texas,  North  Carolina  and  California  and 
defeated. 

Thus  we  have  given  a  resume  of  the  achievements  during  the  legisative  session 
of  1897. 

There  is  much  to  encourage  us  in  continuing  to  press  the  Uniform  Bill. 

The  paper  prepared  for  distribution  among  the  Representatives  and  Senators  in 
Congress  by  Past  President  Boynton,  presented  as  a  brief  to  the  committees  here- 
after named,  is  a  most  able  and  convincing  argument  for  our  cause  and  the  Uniform 
Bill.  It  served  the  purpose  nobly.  The  committee  annex  the  paper  to  this  report, 
together  with  the  reports  of  the  committees  of  the  House  and  Senate  on  the  District 
of  Columbia,  to  each  of  which  it  was  attached,  with  the  purpose  of  having  it  forever 
preserved  in  the  records  of  the  National  Fraternal  Congress. 

The  Uniform  Bill,  as  it  now  stands,  with  the  provision  relative  to  a  reserve  fund, 
hereinbefore  recommended,  is  as  satisfactory  as  we  can  perhaps  make  it.  We  shall, 
most  probably,  as  our  system  and  our  experience  in  its  development  increases,  wish  to 
change  or  improve  some  of  its  provisions. 

The  insurance  departments  are  not  hostile  to  our  fraternal  efforts.  The  belief 
probably  prevails  in  many  of  them  that  our  plan  of  protection  has  defects.  It  is  our 
conviction  that  any  efforts  which  we  may  make  to  strengthen  our  methods  will  be 
encouraged  and  not  retarded.  It  is  not  therefore  wise  to  ask  for  any  more  than  is 
essential,  and  the  better  policy  will  be  to  endeavor  to  create,  rather  than  diminish,  a 
feeling  of  mutual  confidence  between  our  Orders  and  .the  departments  of  insurance 
throughout  the  country. 

Not  only  for  its  forceful  enunciations,  but  as  a  tribute  to  the  memory  of  Major 
N.  S.  Boynton,  I  quote  liberally  from  his  "Brief  submitted  to  the  House  Committee 
on  the  District  of  Columbia,"  to  which  reference  is  made  by  Chairman  Butler: 

Gentlemen :  I  desire  to  submit  to  the  committee  some  of  the  reasons  why  the 
representatives  of  the  Fraternal  Beneficiary  Societies  of  this  country  ask  the  pas- 
sage of  the  bill  entitled  "A  bill  regulating  Fraternal  Beneficiary  Societies,  Orders  or 
Associations  in  the  District  of  Columbia."  I  would  first  call  your  attention  to  the 
fact  that  in  1886  a  body  was  formed  in  Washington,  D.  C,  and  named  the  National 
Fraternal  Congress.  It  was  composed  of  representatives  from  the  leading  legitimate 
Fraternal  Societies.  One  of  the  principal  objects  of  the  Fraternal  Congress  was  to 
secure  uniform  legislation  throughout  the  country  for  their  protection,  such  legisla- 
tion to  be  so  framed  as  to  protect  the  people  from  fake  associations  which  were  being 
organized  in  almost  every  State  in  the  Union. 


51 

Up  to  1893  every  Association  claiming  to  be  fraternal  and  working  under  the 
lodge  system  were  exempt  from  the  operations  of  the  insurance  laws  of  most  of  the 
States;  hence  hundreds  of  speculative  Societies  were  formed.  This  the  National  Fra- 
ternal Congress  sought  to  prevent,  and  has  prevented  by  securing  the  adoption  in  a 
number  of  States  of  the  Uniform  Bill,  which  is  presented  to  you  for  your  consid- 
eration. 

The  legitimate  Orders  and  Associations  are  willing  and  desirous,  through  the 
legislation  proposed,  to  come  under  the  supervision  of  the  constituted  authorities 
of  the  District  of  Columbia. 

To  make  clearer,  if  possible,  the  reasons  why  the  fraternal  beneficiary  system  asks 
this  special  legislation,  if  it  may  be  so  termed,  I  submit  the  following: 

In  this  country  we  find  three  separate  and  distinct  systems  of  life  protection  as 
follows : 

A.  The  "old  line  insurance  or  level  premium  system,"  with  its  endowment,  ton- 
tine and  semi-tontine  features.    The  contract  between  the  company  and  the  insured  is 
called  a  policy.     Profit  and  gain  is  the  controlling  object.     In  every  State  laws  are 
found   on   the"  statute   books   providing   for   their   incorporation    and   governing   their 
operations. 

B.  The  "open  business  assessment  system."    The  contract  between  the  association 
and  the  insured  with  some  is  called  a  policy,  with  others  a  certificate.     This  system 
has  no  fraternal  bond  to  cement  it  together.     The  associations  comprising  this  system 
are  purely  business  concerns,  without  a  representative  form  of  government,  generally 
close  corporations.     In  every  State  laws  are  found  upon  the  statute  books  providing 
for  their  incorporation  and  supervision. 

C.  The  "fraternal  beneficiary  system"  is  composed  of  societies  with  a  representa- 
tive  form   of  government,   with   subordinate  lodges   and  ritualistic  work,   furnishing 
financial   assistance  to  living  members   in   sickness   or   destitution,   providng   for   the 
payment  of  its  living  members  benefits  in  the  case  of  total  physical  disability,  arising 
from  sickness  or  old  age,  and  providing  death  benefits  in  the  event  of  the  death  of 
a  member  for  his  family  or  dependent  blood  relatives. 

The  lines  of  demarcation  between  these  three  systems  are  clear  and  distinct,  and 
should  be  kept  so  in  all  legislative  enactments. 

The  objects  of  these  Fraternal  Orders  or  Associations,  as  incorporated  in  their 
fundamental  laws,  will  be  found  substantially  as  follows : 

Now  I  hold  that  the  fraternal  system  is  entirely  different,  separate  and  distinct 
from  the  old  line  or  level  premium  system  and  the  open  business  assessment  system. 
Only  those  Societies,  corporations  or  associations  organized  and  carried  on  for  the 
sole  benefit  of  their  members  and  beneficiaries,  not  for  profit  and  gain,  can  be  classed 
as  legitimate  fraternal  beneficiary  orders. 

The  mutual  agreement  between  the  Fraternal  Society  and  the  member  is  not  a 
policy  or  contract  like  that  entered  into  between  a  life  insurance  company  and  its 
policy-holder. 

These  beneficiary  orders  are  cooperative  bodies.  The  members  mutually  agree 
among  themselves,  through  the  laws  of  the  order,  enacted  by  their  chosen  repre- 
sentatives in  the  Grand  or  Supreme  bodies,  to  protect  each  other  and  their  families 
and  dependents  in  case  of  sickness,  disability  or  death  by  contributing  a  certain  amount 
from  time  to  time  as  required  to  provide  for  the  payment  of  the  sum  specified  in  the 
certificate,  or  what  one  contribution  would  bring  on  the  membership.  No  term  en- 
dowment, tontine  or  any  other  form  of  speculative  certificates  are  issued,  neither  can 
a  certificate  within  the  objects  and  purposes  of  a  legitimate  beneficiary  order  be  made 
payable  to  the  estate  or  the  creditors  of  the  member,  nor  can  it  be  used  as  collateral 
for  a  loan  to  secure  a  creditor. 

Hence  it  will  be  seen  that  the  fraternal  beneficiary  system  is  purely  cooperative, 
non-speculative  and  mutual.  These  associations  cannot  be  called  insurance  companies. 
They  do  not  furnish  purely  life  insurance,  nor  can  they  be  classed  with  the  open  busi- 
ness assessment  associations.  There  is  nothing  in  common  between  the  fraternal  sys- 
tem and  the  other  two  systems. 

A  few  years  ago  another  system  was  inaugurated  with  lodges  and  ritualistic  work. 
The  associations  composing  this  system  are  known  as  endowment  orders.  Their  ob- 
jects are  purely  speculative — to  benefit  the  living,  healthy  member.  In  some  cases  they 
provide  for  sick  benefits,  but  the  real  purpose  is  to  give  the  living,  persistent-paying 
member,  at  a  certain  time,  the  amount  of  money  his  certificate  calls  for. 


52 

A  great  many  who  do  not  understand  thoroughly  the  objects  and  purposes  of  the 
fraternal  beneficiary  system  have  confounded  it  with  the  open  business  assessment 
system,  when,  in  fact,  there  is  nothing  in  common  between  the  two.  They  have  also, 
unintentionally,  of  course,  classed  the  endowment  associations  with  the  fraternal  sys- 
tem, when  the  facts  are  that  the  former  have  not  from  their  inception  ever  been  recog- 
nized by  the  latter.  They  have  been  denied  representation  in  the  National  Fraternal 
Congress  because  their  objects  and  purposes  were  foreign  to  the  system  which  that 
body  represents. 

There  should  be  no  friction  between  the  old  line  insurance  system,  the  open  business 
assessment  system,  the  endowment  system  and  the  fraternal  beneficiary  system.  The 
business  of  the  other  systems  has  not  suffered  by  reason  of  the  fraternal  beneficiary 
orders.  On  the  contrary,  the  business  of  the  old  line  companies,  as  shown  by  their 
annual  reports,  has  increased  more  rapidly  since  the  advent  of  the  fraternal  societies 
than  ever  before. 

The  reason  for  this  is  simply  because  the  fraternal  beneficiary  societies  are  pio- 
neers and  educators.  Tens  of  thousands  of  men  and  women  join  them  and  secure 
protection  for  those  dependent  upon  them  who  could  not  afford  to  pav  the  cost  of 
life  insurance.  They  attend  lodge  meetings,  discuss  the  principles  of  life  protection, 
get  interested  in  the  proceedings  of  the  lodge,  see  the  benefits  which  their  own  dis- 
abled members  and  the  widows,  orphans  and  dependents  of  deceased  members  receive 
by  reason  ot  such  membership,  and  also  become  thoroughly  familiar  with  all  the  de- 
tails of  the  business  part  of  such  organizations. 

Men  in  this  country,  where  wealth  frequently  changes  hands,  do  not  always  remain 
poor  or  even  in  moderate  circumstances.  The  wheel  of  fortune  frequently  brings 
them  to  the  top,  and  then  they  can  afford  to  purchase  life  insurance  from  the  old  line 
companies  at  the  higher  price. 

They  cannot  get  it  in  blocks  of  ten,  twenty,  fifty  or  one  hundred  thousand  dollars 
from  the  fraternal  societies,  but  having  been  thoroughly  educated  in  the  lodge  room 
to  realize  the  value  of  life  protection,  the  old  line  life  insurance  agent  can  secure  an 
application  from  them  for  a  large  amount  of  either  ordinary  life  insurance  or  endow- 
ment insurance  much  easier  than  if  they  had  never  been  members  of  a  fraternal 
society. 

As  poverty  is  said  to  be  the  mother  of  crime,  w^e  believe  that  the  protection  thrown 
around  American  homes  by  the  fraternal  beneficiary  system,  now  so  strong  in  our 
country,  has  been  instrumental  in  reducing  crime.  It  certainly  has  reduced  pauperism. 
Members  of  these  orders  do  not  become  applicants  for  public  charity.  The  fraternal 
ties  that  bind  them  together  guarantee  financial  assistance  in  time  of  need. 

As  the  fraternal  beneficiary  system  has  grown  to  be  a  power  for  good  in  our 
country,  its  friends  and  promoters  believe  that  favorable  legislation  should  be  given  it. 

The  uniform  bill  which  has  been  submitted  to  you  for  consideration  has  been  pre- 
pared by  some  of  the  best  legal  talent  in  the  country,  and  after  several  years^  careful 
consideration  by  the  National  Fraternal  Congress  itself.  We  feel  that  you  will,  after 
a  thorough  investigation,  be  convinced  that  it  ought  to  pass  and  become  a  law  in  the 
District  of  Columbia. 

It  has  been  adopted  by  Michigan,  Illinois,  Iowa,  and  in  New  York,  Massachusetts, 
Wisconsin,  Minnesota  and  several  other  States  with  some  minor  changes.  Our  simple 
desire  is  to  secure  uniformity  of  stautory  legislation  throughout  the  United  States. 

No  man  connected  with  the  Fraternal  System  possessed  greater  power  in  logical 
argument  or  more  personal  magnetism  than  Major  N.  S.  Boynton.  No  man  con- 
nected with  the  System  had  the  influence  in  impressing  upon  the  members  of  Fraternal 
Beneficiary  Societies,  and  the  public  at  large,  including  legislators,  judges  and  in- 
surance commissioners,  his  personal  convictions  concerning  the  distinguishing  dif- 
ferences between  what  he  was  pleased  to  call  'The  Three  Systems  of  Life  Protec- 
tion." The  imprint  of  his  thought  is  found  in  the  reports  of  committees  to  the  Con- 
gress, in  legisative  enactments  and  in  decisions  of  courts  of  last  resort. 

Major  Boynton  was  no  less  a  master  in  ridicule  and  satire  than  in  forceful  argu- 
ment, as  the  writer  has  good  cause  to  know. 

How  unfortunate  that  this  great  and  good  man  planted  seeds  which  produced 
thorns  and  thistles !  Not  until  he  had  sown  broadcast  and  grown  a  great  harvest  of 


53 

erroneous  ideas  did  he  realize  the  untoward  work  that  he  had  done!  Well  do  I  re- 
member that  night  in  Luddington,  ten  years  later,  when  I  had  been  furnished  a  cot 
in  his  bedroom  that  we  might  "lay  at  our  ease  for  an  undisturbed  conference  concern- 
ing the  coming  conflict  with  the  boys  on  the  morrow !"  For  years  he  had  been  my 
severest  critic,  but  now  by  telegram  he  had  summoned  me  to  come  to  his  aid  in 
steering  the  old  ship  into  a  new  channel.  That  night  he  opened  up  his  heart  to  me 
and  whatever  of  unfriendly  feeling  that  I  had  ever  entertained  melted  into  regard 
and  sympathy.  He  regretted  his  age  because  he  could  not  start  afresh  in  the  reforma- 
tions that  he  clearly  recognized  as  of  pressing  necessity.  He  encouraged  me  to  con- 
tinue to  do  my  utmost  in  undoing  what  he  had  done.  He  may  have  likewise  un- 
bosomed himself  to  others,  but  not  to  my  knowledge.  His  change  of  opinion  appeared 
complete  and  he  largely  credited  the  change  to  the  recent  progressive  position  taken 
by  Mrs.  Francis  E.  Burns  and  her  asociates  in  pressing  reforms  upon  the  Ladies  of 
the  Modern  Maccabees.  He  said  that  it  was  Mrs.  Burns  who  first  caused  him  to  stop 
and  think  of  the  serious  situation  into  which  he  had  brought  the  Knights.  With  all 
of  his  positive  assertions  and  all  of  his  dogmas  publicly  proclaimed  and  generally 
accepted,  Major  Boynton  failed  to  comprehend  the  fundamental  principles  underlying 
mutual  insurance  protection  until  near  the  close  of  his  brilliant  career.  For  many 
years  he  labored  under  the  conviction  that  the  payment  of  $1,000  as  a  "benefit"  was 
different  from  $1,000  paid  as  "indemnity,"  and  that  the  business  method  to  assure 
the  certain  payment  of  the  indemnity  was  not  necessary  to  guarantee  the  benefit.  This 
conviction  resulted  from  his  original  conception  (for  he  was  one  of  the  Fathers  of 
Fraternity)  of  the  "Benefit"  as  a  "Charity"  or  "Benevolence,"  and  his  belief  that  the 
hearts  of  the  people  would  continuously  and  forever  move  them  to  make  "donations" 
to  satisfy  the  demands  of  Charity.  He  had  a  sad  awakening  to  the  reality  that  "cold 
business  plans"  were  required  to  make  possible  of  performance  the  promise  to  pay  a 
designated  sum  of  money,  whether  or  not  it  be  called  a  "Benefit"  or  "Indemnity." 

"Experience  teaches  a  dear  school,"  and  Major  Boynton  and  many  others  would 
learn  in  no  other. 

The  Constitution  and  Laws  of  the  Congress  were  amended  to  conform  to  the  text 
of  the  Uniform  Bill,  declaration  4  being  as  follows : 

Fourth. — No  fraternal  society,  order  or  association  shall  be  entitled  to  repre- 
sentation in  this  Congress  unless  such  society,  order  or  association  be  formed  or  or- 
ganized and  carried  on  for  the  sole  benefit  of  its  members  and  their  beneficiaries,  and 
not  for  profit,  having  a  lodge  system,  with  ritualistic  form  of  work  and  representative 
form  of  government,  and  making  provision  for  the  payment  of  benefits  in  case  of 
death  (with  provision,  if  its  "laws  so  provide,  for  the  payments  of  benefits  in  case  of 
sickness,  temporary  or  physical  disability,  either  as  the  result  of  disease,  accident  or 
old  age,  provided  the  period  in  life  at  which  payment  of  disability  benefits  on  account 
of  old  age  commences  shall  not  be  under  seventy  years),  the  fund  for  the  payment  of 
such  benefits  and  the  expenses  of  such  association  being  derived  from  assessments  or 
dues  collected  from  its  members,  and  death  benefits  payable  to  the  families,  heirs, 
blood  relatives,  affianced  husband,  or  affianced  wife  of  or  persons  dependent  on  the 
member ;  these  principles  being  an  obligated  duty  on  all  the  members,  to  be  discharged 
without  compensation  or  pecuniary  reward,  the  general  membership  attending  to  the 
general  .business  of  the  order,  and  a  fraternal  interest  in  the  welfare  of  each  other  a 
duty  taught,  recognized  and  practiced  as  the  motive  and  bond  of  organization. 

The  Twelfth  Annual  Session  of  the  National  Fraternal  Congress  was  held  in 
Baltimore,  November  15,  1898,  and  is  memorable  from  the  report  of  the  "Committee 
on  Rates"  submitting  a  "Table  of  Mortality"  and  contribution  rates  deduced  there- 
from. This  committee  was  composed  of  H.  C.  Sessions,  Chairman;  F.  A.  Draper  and 
D.  P.  Markey.  President  James  E.  Shepard  was  a  member  ex  officio.  The  Mortality 


54 

Table  (modified  as  hereafter  explained)  is  now  widely  known  as  the  "National  Fra- 
ternal Congress  Table  of  Mortality,"  and  has  been  made  by  many  States  a  standard 
for  valuation  as  well  as  for  minimum  contribution  rates.  Concerning  the  Mortality 
Table  the  committee  said: 

The  Mortality  Table  hereinafter  presented  reflects  the  judgment  of  the  committee, 
based  as  it  is  upon  actual  deaths,  as  being  as  low  as  possible,  keeping  in  view  safety 
and  the  minimum  number  of  assessments  contemplated  by  the  table  of  rates. 

The  mass  of  data  from  which  this  Mortality  Table  is  adjusted  is  so  extensive  that 
the  conclusions  reached  have  ample  support  as  to  its  sufficiency.  It  can  be  applied  to 
new  business  and  old  business  at  attained  ages,  when  the  latter  is  in  good  physical 
condition.  Should  such  old  business  be  below  the  average,  then  such  impairment 
must  be  provided  for  by  an  addition  to  the  rate  of  the  table. 

The  Mortality  Table  as  reported  and  published  in  1898  had  a  defect  due  to  arith- 
metical errors  in  the  derivation  of  the  columns  of  living1  and  dying  from  the  column 
of  the  probabilities  of  dying.  There  was  also  an  abruptness  of  gradation  at  ages  44-45, 
which  needed  adjustment.  I  had  no  part  in  the  construction  of  the  original  table,  but 
I  did  present  to  the  Chairman  of  the  committee  a  regraduation  of  the  probabilities  of 
dying  for  ages  above  40,  which  changed  the  number  living  and  dying  above  age  44, 
and  ended  the  Table  at  age  98  instead  of  age  99.  This  suggested  change  was  adopted 
by  the  committee  as  the  reconstructed  Table  (above  age  40)  reported  to  the  Congress 
in  1899,  and  this  is  the  one  now  known  and  accepted  as  the  National  Fraternal  Con- 
gress Table  of  Mortality  and  which  appears  in  this  book.  The  committee  submitted 
tables  of  contribution  rates  on  the  "Level  Rate  Plan,"  the  "Step  Rate  Plan"  and  the 
"Modified  Step  Rate  Plan."  These  several  "Plans,"  with  explanations  by  the  com- 
mittee, follow : 


LEVEL  RATES. 

This  table  shows  the  lowest  rates  that  can  be  deduced  from  the  Mortality  Table 
above.  The  full  amount  must  be  collected  annually,  and  the  portion  not  used  to  pro- 
vide for  current  mortality  must  be  invested  at  4  per  cent  interest.  The  annual  rate  is 
calculated  on  the  basis  that  the  full  amount  is  paid  at  the  beginning  of  the  year.  The 
monthly  rates  are  increased  slightly  to  provide  for  the  loss  of  interest  due  to  that 
method  of  payment  and  the  slightly  less  amount  contributed  by  dying  members. 


Age.  Annual.  Monthly. 

$10.62  $  .93 

10.92  .96 

11.24  .98 

11.57  i.oi 

11.92  1.04 

12.28  1.07 

12.67  i. n 

13.08  1.14 

13.51  1.18 

13.96  1.22 

1443  L26 

14.94  L3I 

1547  1-35 

16.03  1.40 

16.62  1.45 

17-24  I-5I 

17.90  1.57 

1 8.60  1.63 

19.34  1.69 

20.11  1.76 


21 
22 
23 
24 
25 
26 
27 
28 
29 
30 
31 
32 

33 
34 
35 
36 
37 
38 
39 
40 


Age. 

4i 
42 

43 

44 
45 
46 
47 
48 
49 
50 
5i 
52 
53 
54 
55 
56 
57 
58 
59 
60 


Annual. 

Monthly. 

$20.93 

$1.83 

21.80 

1.91 

22.72 

1.99 

23-69 

2.07 

24.72 

2.16 

25.81 

2.25 

26.91* 

2-35 

28.20 

2-45 

29-5I 

2.58 

30.98* 

2.71 

32.39 

2.83 

33-97 

2-97 

36.65 

3-12. 

37-45 

3-28 

39.36 

344 

41.41 

3-62 

43-60 

3-88 

45.94 

4.02 

48.45 

4-24 

5I.I3 

4-47 

*Should  be  $26.97  and  $30.90. 


55 

STEP  RATES  AND  MODIFICATIONS. 

Column  i  gives  the  age  groups.  Column  2  gives  the  annual  rates  for  the  natural 
step-rate  to  age  61,  and  level  rate  from  that  age  for  the  balance  of  life.  Column  3, 
the  monthly  rates,  as  derived  from  the  annual  rates  with  allowance  for  slight  loss  due 
to  the  method  of  payment.  These  two  columns  are  the  basis  for  calculating  columns 
4  and  5.  Column  4  shows  a  modification  of  the  natural  step-rate  by  means  of  an 
accumulation  of  15  cents  per  month,  which  is  used  to  reduce  the  level  cost  from  age 
61  to  $3.00  per  month.  Column  5,  a  similar  modification,  but  with  an  accumulation 
of  30  cents  per  month,  and  a  level  cost  from  age  61  to  $2.50  per  month.  Under  either 
of  these  plans  all  members  pay  the  same  rates  at  the  same  attaind  ages.  The  purpose 
in  view  in  these  tables  is  to  have  a  plan  that  requires  but  little  detail  in  its  operation, 
so  as  to  be  readily  comprehended  by  the  officers  of  the  local  lodges. 

12  34  5 

Ages.  Annual.  Monthly.  Monthly.  Monthly. 

21-25  $  5.11  $  .45  $  -60  $  .75 

26-30  5.40  .48  .63  .78 

31-35  5-93  -52  .67  .82 

36-40  6.71  .59  -74  .89 

41-45  8.14  .72  .87  1.02 

46-50  10.25  .OX)  I.O5  1.20 

51-55  13.82  1. 21  1.36  I.5I 

56-60  19.60  1.72  1.87  2.02 

61  54-01  4-73  3-00  2.50 

ACCUMULATION  TABLE. 

The  step-rate  plan,  as  shown  in  Column  2,  Table,  can  be  modified  to  meet  the 
necessities  of  different  societies  by  varying  the  amount  of  the  accumulation.  The 
following  table  is  submitted  as  a  basic  table  for  that  purpose.  It  shows  how  an  accu- 
mulation of  $1.00  per  annum,  paid  in  monthly  installments,  may  be  used  to  reduce  the 
level  cost  after  age  61,  from  the  level  rate  of  $54.01.  The  table  shows  the  amount 
of  such  reduction,  based  on  age  at  entry,  giving  to  each  member  the  full  benefit  of  the 
term  of  membership.  Thus  the  member  entering  at  21  would  secure  an  annual  reduc- 
tion of  $11.61,  giving  an  annual  cost  from  age  61  of  $42.40.  The  member  entering  at 
36  would  secure  a  reduction  of  $4.71,  giving  annual  cost  from  age  61  of  $49.30.  The 
adjustment  of  annual  cost  after  age  61  would  only  have  to  be  made  when  the  mem- 
bers reach  age  61,  the  rates  being  the  same  for  same  attained  ages  from  21  to  60. 

With  this  table  as  a  basis,  the  annual  accumulation  necessary  to  secure  greater 
reductions  can  be  calculated.  If  the  accumulation  was  $2.00  per  annum,  the  reduc- 
tion would  be  twice  that  of  the  table,  and  so  in  proportion  for  any  other  amount 
of  accumulation : 

At  age  61  the  level  rate  is  54.01. 

At  each  age  at  entry  $1.00  per  year  additional  to  natural  step-rate  paid  as  a  special 
accumulation  will  give  the  following  annual  reduction  from  age  61. 

Age.          Reduction.  Age.          Reduction.  Age.          Reduction. 

21  $11.61  31  $6.52  41  $3.28 

22  11.00  32  6.13  42  3.03 

23  10.41  33  5-75  43.  2.79 

24  9-85  34  5-39  44  2.55 

25  9-30  35  5-04  45  2.33 

26  8.80  36  4.71  46  2.13 

27  8.30  37  4.40  47  1.93 

28  7.82  38  4.10  48  1.74 

29  7.36  39  '  3.81  49  1.56 

30  6.93  40  3-53  50  1.39 

The  Table  of  Level  Rates,  as  published  in  the  proceedings  of  the  Congress  for 
1898,  1899  and  1900,  and  produced  above,  have  been  copied  widely,  and  are  found  in 
1913  editions  of  publications  issued  by  the  Fraternal  Monitor  and  the  American  Service 
Union,  and  in  the  constitution  and  laws  of  several  Fraternal  Orders. 


56 

It  is  unfortunate  that  the  monthly  rates  are  not  accurate  for  ages  above  45,  having 
been  obtained  by  the  approximate  method  of  multiplying  the  annual  rate  by  the  frac- 
tion .0875. 

The  annual  rates  do  not  vary  more  than  one  cent  from  the  correct  rates,  excepting 
at  ages  47  and  50,  where  the  rates  should  be  $26.97  and  $30.90  instead  of  $26.91  and 
$30.98  respectively,  as  printed  in  the  three  reports  for  1898,  1899  and  1900. 

The  correct  annual  and  monthly  level  contribution  rates  appear  amongst  the  tables 
in  this  book. 

It  is  also  unfortunate  that  the  committee  failed  to  state  in  the  explanation  that  the 
level  rates  were  net  and  intended  to  provide  for  $1.000  death  benefit  only,  payable  at 
death  in  one  sum,  and  that  contributions  continued  until  death. 

One  Society  adopted  them  as  gross  rates,  while  another  adopted  them  with  the 
provision  that  the  contributions  would  cease  at  age  70.  A  third  adopted  them  to 
provide  for  $1,000  payable  in  one  sum  at  death,  or  $1,000  payable  in  ten  equal  annual 
installments  in  event  of  permanent  total  disability,  or  $1,000  payable  in  ten  equal  annual 
instalments  as  an  old  age  benefit,  the  first  instalment  being  due  and  payable  at  age  70. 
The  officials  of  the  three  societies  were  surprised  when  informed  that  the  rates  were 
inadequate  for  the  benefits  promised.  They  had  "taken  them  from  the  Proceedings  of 
the  National  Fraternal  Congress." 

The  Congress  of  1898  referred  the  Mortality  Table  and  the  Table  of  Rates  to  the 
succeeding  session. 

In  1899,  at  Chicago,  the  Special  Committee  on  Rates,  H.  C.  Sessions,  D.  P.  Markey 
and  James  E.  Shepard,  again  reported  the  Mortality  Table  (regraded  and  adjusted 
as  heretofore  stated)  and  the  Rate  Tables.  Following  paragraphs  are  taken  from 
the  report : 

The  committee  has,  during  the  past  year,-  spent  much  time  and  study  upon  the 
question  submitted  to  it  by  the  Congress.  It  has  had  opportunities  for  extending  its 
research  somewhat,  as  new  data  have  been  compiled  of  the  actual  experience  of  th: 
fraternal  orders,  members  of  this  Congress,  which  were  not  available  one  year  ago. 
After  a  careful  and  painstaking  investigation  of  both  the  old  and  new  data,  nothing 
has  been  disclosed  that  would  lead  the  committee  to  alter  the  mortality  table  sub- 
mitted as  a  standard  or  guide  for  this  Congress  in  determining  the  probable  mortality 
to  be  expected  from  any  order  under  normal  conditions. 

The  committee  desires  to  say  that  the  net  level  rates  and  the  step-rate  plans  four 
and  five  submitted  in  its  report  of  last  year  were  submitted  not  as  rates  or  plans  to  be 
adopted  by  the  Congress,  but  in  compliance  with  the  direction  of  the  Congress  to 
submit  net  level  rates  and  a  step-rate  plan  based  upon  the  mortality  table.  The  mor- 
tality table  could  be  adopted  as  a  standard1  of  mortality  without  adopting  either  plan 
of  rates  submitted,  or  without  giving  its  preference  for  either  a  reserve  or  a  step- 
rate  plan,  or  the  particular  rates  submitted  by  the  committee,  which  were  substituted 
as  illustrations  of  both  systems. 

There  are  several  level  premium  plans,  also  several  different  modifications  of  the 
natural  premium  or  step-rate  plan  already  in  use  by  different  orders,  members  of  this 
Congress,  but  with  no  recognized  standard  by  which  the  officers  of  either  plan  may 
try  them  for  the  purpose  of  determining  the  sufficiency  of  their  rates,  which  can  only 
be  measured  accurately  by  means  of  a  mortality  table. 

The  only  recognized  standards  in  this  country  are  the  Actuaries,  and  the  American 
experience  tables  of  mortality.  The  Congress,  imbued  with  a  belief  that  both  the 
above  tables  were  higher  than  the  actual  experience  of  selected  lives  would  disclose, 
appointed  this  committee  to  investigate  and  report  a  mortality  table  based  upon  the 
average  experience  o£  the  fraternal  orders,  and  the  same  was  embodied  in  its  report 
one  year  ago  and  was  considerably  less  in  all  ages  below  the  age  of  76  than  either 
of  the  above  tables. 

In  constructing  the  mortality  table  submitted  to  the  Congress  it  was  the  aim  of 
the  committee  to  reflect  as  near  as  possible  the  actual  death  experience  to  be  ex- 
pected of  each  age  under  normal  conditions  of  selection,  and  thus  furnish  an  accurate 
standard  from  which  rates  might  be  constructed  with  safety,  or  by  which  an  order 
already  in  existence  might  adjust  its  rates  if  it  so  desired.  It  is  a  well-known  fact 
to  the  committee  that  the  death  experience  of  different  orders  vary  from  the  standard 
submitted.  Many  seem  to  have  had  a  more  favorable  experience,  while  others  may 
have  encountered  a  higher  death  experience  than  the  table  submitted.  The  fact  that 
some  orders  have,  in  the  past,  encountered  a  higher  death  experience  than  the  table 
^.oes  not  prove  that  the  table  is  too  low,  but  rather  that  the  high  death  rate  in  them 


57 

is  due  to  fault  of  plan  or  management,  or  both,  and  the  experience  of  such  orders  may 
be  safely  classed  as  exceptional,  rather  than  as  establishing  a  general  law  by  which  all 
orders  should  be  governed.  It  would  hardly  be  correct  to  conclude  that  because  sixteen 
old  line  life  companies  had  failed  to  each  one  that  is  still  doing  business  in  this  country, 
that  their  failure  was  due  to  the  mortality  table  upon  which  their  rates  were  based 
being  too  low. 

Neither  is  it  safe  to  conclude  that  the  mortality  table  submitted  by  this  committee 
is  too  high,  if  it  is  found  that  the  death  experience  of  a  majority  of  the  orders'  mem- 
bers composing  the  Congress  have  so  far  shown  a  lower  experience  than  the  table 
indicates.  It  will  be  found  upon  examination  of  such  orders  that  during  their  early 
years  of  history  there  has  been  a  continual  growth,  and  each  will  be  found  with  a 
much  larger  percentage  of  membership  still  within  the  limit  of  the  benefit  of  careful 
medical  selection  in  proportion  to  total  membership,  than  such  orders  will  be  able 
to  maintain  with  a  continually  increasing  membership.  With  a  small  membership 
a  25  per  cent  increase  is  easily  obtainable,  but  with  a  large  membership  the  per  cent  is 
more  likely  to  fall  below  10  per  cent. 

As  it  is  impossible  to  measure  in  advance  the  amount  of  new  business  that  any 
order  is  likely  to  secure,  it  will  be  readily  seen  that  the  factor  of  new  business  and  the 
modifications  the  presence  of  such  new  business  will  have  upon  current  death  rate 
of  both  old  and  new  members  as  one  group  or  mass  must  be  eliminated  from  the 
mortality  table.  It  is  a  well-known  fact  that  the  per  cent  of  new  business  varies  in 
most  of  the  orders  each  year  and  the  per  cent  varies  as  between  the  various  orders 
each  year. 

There  is  a  point  of  measurement  of  the  actual  mortality  of  the  orders,  common 
to  each,  and  the  aim  of  the  committee  has  been  to'  submit  a  table  of  mortality  that 
would  give,  as  near  as  possible,  the  actual  death  experience  to  be  expected  at  each 
age  of  members  who  have  been  such  a  sufficient  time  to  be  removed  from  the  benefit 
of  medical  selection.  The  committee  having  reached  the  conclusions  above  expressed, 
its  aim  will  be  to  explain  to  the  Congress  the  mortality  table  and  the  different  tables 
of  rates  submitted. 

Your  committee  would  suggest  as  the  first  and  important  question  in  this  connec- 
tion:  Is  it  desirable  for  the  Congress  to  adopt  a  standard?  If  for  no  other  purpose 
is  it  not  desirable  that  the  different  orders,  members  of  this  Congress,  which  desire 
to  place  their  business  upon  a  safe  and  permanent  basis,  should  have  a  standard  by 
which  to  measure  the  past  and  future  experience,  and,  if  necessary  for  safety,  conform 
to  that  which  is  required?  This  latter  reason  should,  it  seems  to  your  committee, 
be  sufficient  to  require  of  the  Congress  a  safe  and  reliable  standard. 

Then,  again,  does  not  this  danger  confront  all  of  the  fraternal  orders?  If  the 
Congress  fails  to  adopt  a  standard,  do  we  not  leave  the  door  open,  and  thereby  invite 
the  several  insurance  departments  in  different  States  to  fix  a  standard  for  the  orders, 
as  has  already  been  done  in  the  Province  of  Ontario,  which  law  went  into  force 
June  30,  1898? 

The  death  rate  in  the  lower  ages  of  any  order  will  always  be  somewhat  in  pro- 
portion as  the  new  business  is  to  the  members  in  those  ages  not  affected  by  the  medi- 
cal examination.  As,  for  instance,  with  only  10  per  cent  of  the  members  not  yet  re- 
moved from  the  benefits  derived  from  medical  examination,  the  death  rate  would  be 
greater  than  if  the  volume  of  new  business  was  50  per  cent  at  such  ages. 

The  foregoing  indicate  a  few  of  the  many  reasons  why  the  mortality  table  sub- 
mitted might  be  correct  and  still  not  agree  with  the  actual  death  experience  of  many 
orders  as  reflected  or  ascertained  by  combining  both  old  and  new  business,  and  the 
same  reasons  will  explain  why  different  orders  with  about  the  same  membership,  but 
differing  in  the  per  cent  of  new  business,  experience  different  death  ratios. 

The  problem  set  forth  in  the  preparation  of  the  following  table  involved  the  basis 
of  a  minimum  rate  with  the  elimination  of  cash,  paid  up  and  extended  values.  For  a 
new  order,  starting  with  fresh  lives  and  careful  selection,  it  is  believed  the  table  pre- 
sents ample  basis  when  combined  with  three  or  three  and  one-half  per  cent  rate  of 
interest.  The  mass  of  data  from  which  this  mortality  table  is  adjusted  is  so  extensive 
that  the  conclusions  reached  have  ample  support  as  to  its  sufficiency.  It  can  be  applied 
to  new  business  and  old  business  at  attained  ages,  when  the  latter  is  in  good  physicial 


58 

condition.     Should   such   old  business  be  below   the  average,   then   such   impairment 
must  be  provided  for  by  an  addition  to  the  rate  of  the  table. 

On  motion  of  Mr.  Markey  the  report  of  the  Special  Committee  was  unanimously 
adopted.  On  motion  of  Mr.  Stevenson  the  following  resolution  was  unanimously 
adopted : 

Resolved,  That  the  Mortality  Table  presented  by  the  Committee  on  Rates  be  recom- 
mended by  this  Congress  as  a  proper  guide  for  the  adjustment  of  rates. 

In  1900,  at  Boston,  the  National  Fraternal  Congress  unanimously  adopted  the 
following  resolution  offered  by  Mr.  D.  D.  Aitken,  Chairman  of  the  Committee  on 
Rates : 

Your  committee,  to  whom  was  referred  all  matters  pertaining  to  rates,  would  most 
respectfully  report; 

That,  in  its  judgment,  this  Congress  should  recommend  to  the  law-making  power  of 
all  States  and  Provinces  in  the  enactment  of  laws  that  will  require  all  Fraternal  Bene- 
fit Societies  thereafter  organized  and  not  theretofore  admitted  to  do  business  therein, 
to  adopt  rates  not  lower  than  is  demonstrated  to  be  necessary  by  the  following  mor- 
tality table,  adopted  by  this  Congress  at  its  last  meeting: 

The  Mortality  Table  (as  published  in  this  book)  is  then  given,  and  the  Committee 
continues : 

Your  Committee  further  recommend  that  the  rates  deduced  from  this  Mortality 
Table  and  prepared  by  your  Committee  on  Statistics,  which  are  as  follows,  be 
recommended  to  the  consideration  of  the  States  and  Provinces  as  proper  rates  for 
the  level-premium  and  step-rate  plans  where  no  scaling  of  certificates  is  made. 

Then  follows  the  tables  of  level  premiums  and  step  rates  heretofore  given. 
Returning  to  the  Proceedings  of  the  Congress  at  Baltimore  in  1898,  I  extract  the 
following  from  the  report  of  the  Committee  on  Statutory  Legislation : 

In  the  Province  of  Quebec  the  law  requires  a  deposit  of  $5,ooo  with  power  of 
demanding  an  increase  thereto  from  time  to  time,  and  has  other  objectionable  features. 
The  chairman  of  your  committee  had  a  personal  interview  in  Quebec  with  the  pro- 
vincial authorities,  and  it  is  believed  that  with  united  effort  a  material  modification 
can  be  obtained,  and  probably  the  main  features  of  our  uniform  law  adopted. 

Virginia  has  passed  a  Fraternal  Act  in  the  lines  of  the  uniform  law. 

In  Georgia,  a  law,  which  on  the  face  applies  to  assessment  insurance,  with  a  hos- 
tile administration  of  the  Insurance  Department,  might  be  held  applicable  to  Fraternal 
Orders.  The  present  Commissioner  does  not  so  apply  it.  It  would  be  wise  to  make 
the  effort  to  have  the  exemption  put  in  the  law. 

In  Kentucky,  legislation  which  was  not  satisfactory  to  our  brethren  was  defeated. 
We  are  advised  that  the  Uniform  Bill  can  be  secured  there. 

An  attempt  was  started  in  Ohio  to  repeal  the  present  law,  the  Uniform  Bill,  but 
was  abandoned. 


The  Committee  on  Statutory  Legislation  reported  to  the  Congress  at  Chicago 
in  1890  that  "the  Parliament  of  Ontario  had  passed  an  Act  that,  in  effect,  denied 
Societies  of  the  United  States  the  privilege  of  doing  business  in  that  Province;  that 
the  effort  to  secure  a  law  in  Quebec  failed  and  that  the  requirement  of  a  deposit  of 
$5,000  was  still  in  effect;  that  a  bill  passed  the  North  Carolina  Legislature  on  the 
line  of  the  Uniform  Bill,  and  that  the  Uniform  Bill  was  adopted  in  Indiana  and  Kan- 


59 

sas.    That  a  bill  failed  of  passage  in  Oregon  due  to  a  division  amongst  the  Fraternal 
Societies. 

The  provision  of  the  Act  of  Ontario  was  as  follows : 

Unless  the  Society  provides  for  its  contracts  upon  lives  at  least  to  the  extent  of 
collecting  from  its  members  premiums  not  less  than  those  set  out  in  Schedule  A, 
and  such  further  sum  as  is  sufficient  to  provide  for  the  expenses  of  management,  it  is 
not  admissible  to  register. 

Another  provision   was   as   follows : 

No  company,  Society,  Association  or  organization  incorporated  after  the  tenth 
day  of  March,  1890,  under  Chapter  172  of  The  Revised  Statutes  of  Ontario,  1887,  or 
under  Chapter  211  of  The  Revised  Statutes  of  Ontario,  1897,  shall  undertake  or  effect 
or  agree  or  offer  to  undertake  or  effect  any  contract  of  insurance  within  the  mean- 
ing of  Section  2. 

The  rates  of  Schedule  A  are  known  as  the  Hunter  rates  and  are  approximately  the 
same  as  those  recommended  by  the  rate  committee  to  the  National  Fraternal  Con- 
gress. Dr.  Oronhyatekha,  as  President  of  the  National  Fraternal  Congress  in  his 
address  in  1900  at  the  Boston  session,  set  out  in  full  for  comparison  the  level-premium 
rate  according  to  the  National  Fraternal  Congress  Table  and  according  to  those  known 
as  the  Hunter  rates  and  also  those  known  as  Blackadar's  rates.  Quotations  will  here- 
after be  made  from  Dr.  Oronhyatekha's  address  and  the  schedules  will  be  given  in 
that  connection. 

History  along  the  line  of  adequate  rates  was  making  rapid  progress  by  the  time 
of  the  fourteenth  annual  session  of  the  'National  Fraternal  Congress  held  in  the 
city  of  Boston,  August  28,  29,  30  and  31,  1900.  The  Committee  on  Credentials  began 
to  play  its  part  in  this  drama  by  recommending  the  following : 

Your  Committee  have  become  satisfied  from  an  examination  of  some  of  the  so- 
cieties applying  for  admission  that  their  rates  of  assessment  are  inadequate  to  pro- 
vide for  the  benefits  provided  in  their  laws,  but  the  Constitution  of  the  Congress 
has  no  requirement  or  standard  upon  this  point.  We,  therefore,  recommend  that 
the  Committee  on  Constitution  and  Laws  formulate  and  present  for  adoption  at  this 
session  a  provison  which  will  enable  this  Committee  to  refuse  admission  to  future 
applicants  for  admission  to  the  Congress,  when  it  is  evident  that  their  table  of  rates 
is  clearly  inadequate  to  provide  for  the  successful  carrying  out  of  their  contracts  with 
their  members. 

A  resolution  to  the  above  effect  was  adopted  by  the  Congress.  In  the  report  of 
the  Committee  on  Conference  with  the  Insurance  Commissioners  the  following  appears : 

In  the  course  of  its  deliberations  the  joint  committee  spent  a  great  deal  of  time  in 
discussing  the  ever-present  question  of  adequate  rates  in  Fraternal  Benefit  Society 
business.  The  members  of  the  committee  representing  the  Insurance  Departments 
insisted  that  their  interest  in  all  matters  pertaining  to  the  business  of  these  societies 
was  founded  solely  in  the  commission  which  they  hold  from  the  people  of  their  re- 
spective States,  empowering  and  directing  them  to  protect  their  citizens,  whose 
patronage  is  solicited  by  these  societies,  from  the  danger  of  imposition  or  loss  arising 
either  from  intentional  imposition  or  from  inherent  weakness  or  defects  of  the  system. 
These  superintendents  seem  to  be  unanimous  in  their  opinion  that  the  assessment 
rates  in  most  of  these  societies  are  now  fixed  at  a  point  below  the  normal  cost  of 
insurance,  and  that  these  rates,  in  the  absence  of  further  provision,  are  not  adequate 
to  successfully  meet  the  obligations  in  the  certificates  issued  to  the  members,  and  they 
insist  that  this  constitutes  an  inherent  weakness  in  the  system  which  they  are 
bound  constantly  to  call  attention  to  in  the  discharge  of  their  obligations  to  the  people 
of  their  States. 

The  joint   committee   was   unanimously   of  the  opinion   that  it   would  be   imprac- 


60 

ticable  to  insist  by  statute  on  any  arbitrary  rate  of  assessment  for  societies  already 
organized  and  doing  business,  but  it  was  the  consensus  of  opinion  in  the  committee 
that  legislation  might  wisely  be  sought  restricting  societies  hereafter  organized,  or 
seeking  admission,  to  transact  Fraternal-  Society  business  to  a  minimum  rate  of  assess- 
ment per  annum  for  benefits  promised.  And  it  was  decided  to  recommend,  both  to 
the  Fraternal  Congress  and  to  the  National  Association  of  Insurance  Superintend- 
ents, that  they  jointly  favor  and  encourage  such  legislation  whenever  and  wherever 
practicable.  Believing  that  such  legislation  would  be  extremely  valuable  to  our 
societies  in  preventing  unfair  competition  by  newly  organized  societies  offering  in- 
ducements which  long  experience  has  convinced  us  can  never  be  realized,  and  feeling 
that  the  effect  of  intelligent  discussion  of  these  subjects,  both  in  and  out  of  the 
Legislature,  is  toward  a  final  determination  desirable  alike  to  the  public  and  the 
Fraternal  Beneficiary  system,  we  advise  the  adoption  of  the  recommendation  by  the 
Congress. 

The  Committee  on  Conference  reported  concerning  the  discussion  of  many  other 
subjects,  including  the  following: 

The  joint  committee  next  took  up  the  question  as  to  whether  or  not  societies 
should  provide  in  the  face  of  their  certificates  for  the  payment  of  a  certain  sum  or  a 
sum  contingent  upon  the  amount  raised  from  one  assessment.  This  has  been  a 
most  prolific  source  of  controversy  between  the  societies  and  the  departments.  In 
Massachusetts  and  other  Eastern  States  the  departments  hold  that  a  Society  depend- 
ing for  its  mortuary  fund  upon  the  contributions  of  its  members  and  having  no  capital 
stock  as  a  basis  of  absolute  promise,  has  no  right  to  make  any  except  a  conditional 
promise  of  benefits;  while  in  Missouri,  Indiana  and  other  Western  States  the 'de- 
partments have  held  exactly  the  reverse,  laying  out  of  sight  the  theory  which  is  at 
the  foundation  of  the  business  and  placing  their  decisions  upon  the  ground  that  the 
citizens  of  their  States,  whose  interests  they  are  safeguarding,  should  be  told  on  the 
face  of  the  contract  to  a  definite  certainty  how  much  money  that  certificate  will 
produce  in  case  of  their  death.  Your  Committee  believes  that  the  construction  by 
the  Eastern  States  is  the  correct  one,  and  that  as  the  plan  of  raising  funds  to  pay 
certificates  depends  absolutely  on  the  voluntary  payments  of  the  members,  that  all 
promises  made  in  reliance  upon  such  contingent  collections  must  of  necessity  be 
contingent  promises,  no  matter  what  the  form  of  words  used  in  the  face  of  the 
certificate  may  be. 

I  make  the  following  excerpts  from  the  address  of  President  Oronhyatekha.  Dr. 
Oronhyatekha  was  the  head  officer  of  the  Independent  Order  of  Foresters  in  Toronto, 
Ontario,  and  known  as  one  of  the  ablest  men  of  .the  Congress,  and  yet  seriously  he 
made  the  following  statements  to  a  body  of  intelligent  men: 

A  commercial  insurance  company  is  formed  in  the  first  place  to  earn  money  for 
the  directors  and  other  shareholders  and  in  the  second  place  to  give  insurance  bene- 
fits to  its  members  or  policy-holders.  In  other  words,  commercial  insurance  companies 
are  organized  and  worked  on  the  same  principle  as  a  sawmill,  a  flour  mill  or  a 
cotton  or  other  factory,  viz. :  to  earn  certain  profits  on  the  investments  made  by  the 
owners.  I  apprehend  I  am  not  departing  from  the  truth  when  I  say  that  the  directors 
and  other  owners  of  mills  and  factories  never  spend  any  sleepless  nights  thinking 
how  best  to  promote  the  interests  of  the  consumers.  Their  concern  is  more  apt 
to  be  centered  on  the  profits  that  can  be  legitimately  made  out  of  their  mill  or  factory. 

A  Fraternal  Benefit  Society,  on  the  other  hand,  is  formed  to  give  insurance  and 
other  benefits  to  its  policy-holders  or  members  at  the  lowest  possible  cost  consistent 
with  safety  and  permanence  without  the  remotest  thought  of  any  profit  for  directors 
or  shareholders.  They  are  therefore  more  like  public  schools,  hospitals  or  charities, 
which  are  organized  and  carried  on  to  do  the  greatest  good  at  a  minimum  cost,  but 
absolutely  without  profit  or  gain  to  anyone,  except  to  the  scholars  and  other  bene- 
ficiaries of  the  educational  or  other  institutions  of  a  civilized  nation. 

Dr.  Oronhyatekha  then  gave  comparative  tables  as  follows : 


61 


WHOLE  LIFE  NET  LEVEL  RATES  PER  $1,000  AT  4%. 
DEATH  BENEFIT  ONLY. 


Entry 
Age. 

—X.  F.  C.  Rates.— 
Annual.        Monthly. 

—  Hunter  Rates  — 
Annual.         Monthly. 

Blackaclar 
Annual 
Rates. 

20 

$10.34 

$0.90 

$10.55              $0.90 

$10.03 

21 

10.62 

•93 

10.91                  .93 

10.32 

22 

10.92 

.96 

11.28                  .96 

10.62 

23 

11.24 

.98 

1  1  .66                 .99 

10.93 

24 

H-57 

I.OI 

12.03 

.02 

11.26 

25 

11.92 

1.04 

12.42 

-05 

11.61 

26 

12.28 

1.07 

12.76 

.08 

11.97 

27 

12.67 

i.  ii 

13-12 

.11 

12.36 

28 

13.08 

1.14 

13-49 

•14 

12.76 

29 

I3.5I 

1.18 

13-87 

.18 

I3-I9 

30 

13-96 

1.22 

14-31 

.21 

13.64 

31 

14-43 

1.26 

14.76 

-25 

14.11 

32 

14.94 

I-3I 

15.22 

.29 

14.61 

33 

1547 

1-35 

15-73 

1-33 

I5.I3 

34 

16.03 

1.40 

16.25 

.38 

15.69 

35 

16.62 

1-45 

16.82 

•43 

16.27 

36 

17.24 

I-5I 

17.42 

.48 

16.89 

37 

17.90 

1-57 

18.05 

-53 

17.54 

38 

1  8.60 

1.63 

18.71 

•59 

18.22 

39 

19-34 

1.69 

19.42 

-65 

18.95 

40 

20.11 

1.76 

20.18 

•71 

20.53 

4i 

20.93 

1.83 

20.97 

-78 

21.38 

42 

21.80 

1.91 

21.81               1.85 

22.29 

43 

22.72 

1-99 

22.70               1.93 

23-25 

44 

23.69 

2.07 

23.65                      2.01 

24.27 

45 

24.72 

2.16 

24.66                     2.09 

25-39 

46 

25.81 

2.25 

25.72                     2.18 

26.49 

47 

26.97 

2.35 

27.31                      2.32 

27.71 

48 

28.20 

2-45 

28.10                     2.38 

28.99 

49 

29-51 

2.58 

29.36                     2.49 

30.36 

50 

30.00 

2.71 

30.72              2.61 

3i.8i 

5i 

32.39 

2.83 

32.17            2.73 

33-35 

52 

33-97 

2.97 

33-71               2.86 

35-00 

53 

35.65 

3-12 

35-34              3-00 

36.74 

54 

37-45 

3.28 

37-07              3-15 

55  : 

39.36 

3.44 

38.94              3.30 



56 

41.41 

3.62 



57 

43.60 

3-88 



58 

45-94 

4.02 

.... 



59 

48.45 

4.24 



60 

5I-I3 

4-47 

.... 



NOTE. — The  monthly  rates  at  the  older  ages  are  too  low,  as  hereinbefore  explained.  See  correct  N.  F. 
C.  monthly  rates  in  tables  of  this  book.  In  the  schedules  published  the  annual  rates  at  ages  47  and  50  are 
given  as  $26.91  and  $30.98.  The  above  are  correct. 

The  National  Fraternal  Congress  Rates  are  those  reported  by  the  Special  Commit- 
tee on  Rates  as  heretofore  published.  The  Hunter  rates  were  prepared  by  J.  Howard 
Hunter,  Superintendent  of  Insurance  of  Ontario.  The  Blackadar  rates  were  prepared 
by  A.  K.  Blackadar,  Actuary  of  the  Dominion  Government  at  Ottawa. 

Before  the  session  of  the  National  Fraternal  Congress  of  1901  there  had  been 
organized  The  Associated  Fraternities  of  America  at  a  meeting  held  in  Chicago  on 
January  21,  of  1901.  The  reason  for  the  organization  is  found  in  the  3rd  and  4th 
paragraphs  of  the  declaration  of  principles,  which  read  as  follows : 


62 

We  hereby  declare  our  uncompromising  opposition  to  any  and  all  legislation  which 
would  tend  to  restrict  the  rights  of  the  membership  of  our  society  to  self-government, 
and  denounce  as  unwise,  unfair  and  against  public  policy  any  statutory  enactments 
for  government  and  control  of  fraternal  associations  which  do  not  apply  expressly 
to  all  societies  with  equal  force  and  effect. 

We  further  declare  that  we  believe  all  societies  should  charge  adequate  mortality 
rates  for  their  promised  benefits,  and  while  we  disclaim  any  attempt  to  curtail  the 
rights  of  the  membership  of  any  association,  to  organize  their  beneficiary  department  in 
such  form  and  conduct  the  same  in  such  manner  as  to  them  shall  seem  most  conducive 
to  their  happiness  and  welfare,  we  courteously  and  earnestly  recommend  that  each 
association  study  its  own  system  and  experience  to  the  end  that  the  association  will  be 
able  to  collect  from  its  contributions  sufficient  to  insure  safety  and  permanency. 

The  sentiment  of  those  who  organized  the  Associated  Fraternities  of  America 
was  voiced  by  Mr.  Edwin  M.  Johnson  in  a  well  digested  and  forceful  address.  Mr. 
Johnson  quoted  at  length  from  the  resolutions  passed  by  the  National  Fraternal  Con- 
gress and  the  reports  of  the  Committee  on  Conference  (heretofore  given  in  part),  and 
then  summed  up  his  protest  and  criticism  as  follows : 

Strange  it  did  not  occur  to  our  brothers  that  new  orders  having  a  plan  so  much 
stronger  than  the  plan  of  old  orders,  and  practicing  what  the  old  orders  professed  to 
believe  but  did  not  practice — being,  therefore,  a  creation  so  different  from  themselves — 
might  not  desire  a  membership.  Especially  should  such  a  membership  be  desired  among 
a  class  of  orders  that  would  apply  a  measure  so  different  to  new  entrants  from  that 
which  they  apply  to  themselves — and  especially,  further,  when  those  with  whom  they 
would  affiliate  would  carry  their  requirements  to  the  length  of  not  only  legislating 
rates,  but  other  conditions  that  the  young  order  must  comply  with  which  they  did 
not  propose  to  comply  with  themselves.  Why  should  the  young  and  healthy  orders 
join  their  influence  with  the  old  orders  and  cooperate  thereby  to  make  laws  and  con- 
ditions against  personal  interest? 

Many  of  the  old  orders  have  for  years  talked  themselves  and  their  members  into 
a  position  of  believing  in  low  rates,  desiring,  of  course,  to  present  the  thought  that 
their  own  rates  were  the  lowest.  They  always  contended  that  their  rates  would 
always  be  the  lowest,  until  Nature  forced  them  to  admit  the  contrary.  They  still 
believe  in  the  benefit  of  talking  "cheapness."  To  enable  them  to  successfully  do  this, 
they  would  today,  after  more  than  a  quarter  of  a  century  of  experience  and  wrong 
practice,  legislate  the  "competitor"  into  a  position  of  having  to  collect  a  higher  rate 
than  the  assessment  of  the  older  orders,  even  after  the  increased  burdens  they  have 
loaded  onto  them. 

It  was  difficult  to  defend  the  position  that  adequate  rates  should  be  applied  to  new 
organizations  and  not  applied  to  the  new  members  of  old  organizations,  and  as  we 
shall  see  later  on,  Mr.  Markey  offered  a  resolution  that  all  societies  should  adopt 
adequate  rates  by  1905. 

The  meeting  in  Chicago  was  a  preliminary  meeting  for  the  organization  of  the 
Associated  Fraternities  of  America,  the  first  annual  meeting  being  held  in  July,  1901, 
at  Cambridge  Springs,  Pa.  The  following  is  a  list  of  the  Societies  represented  at  that 
meeting : 

Ancient  Order  of  Gleaners.  Fraternal  Army  of  America. 

Ancient  Order  of  Red  Cross.  Fraternal  Tribunes. 

American  Catholic  Union.  Grand  Fraternity. 

Brotherhood  of  American  Yeomen.  Highland  Nobles. 

Bankers'  Fraternal  Union.  Home  Guards  of  America. 

Daughters  of  Columbia.  Knights  of  Kadosh. 

Fraternal  Brotherhood  of  the  World.  Knights  and  Ladies  of  Columbia. 

Fraternal  Bankers'  Reserve.  Loyal  Mystic  Legion  of  America. 


63 


Mystic  Workers. 

Mutual  Protective  League. 

Mystic  Toilers. 

Modern  Tonties. 

Modern  Brotherhood  of  America. 

Modern  Order  of  Praetorians. 

Missouri  Fraternal  Congress. 

National  Protective  League. 

Order  of  Americus. 


Order  of  Washington. 

Royal  Circle. 

Royal  Fraternal  Union. 

Sons  and  Daughters  of  Justice. 

Societies  Des  Artisans. 

The  Chevaliers. 

The  Fraternal  Censor. 

United  Moderns. 

Utopian  Brotherhood  of  America. 


Mr.  Lee  W.  Squier  was  Chairman  of  the  Committee  on  Jurisprudence  and  Legisla- 
tion, and  from  his  appointment  at  the  organization  of  the  Associated  Fraternities  of 
America  in  January,  1901,  to  July,  1901,  he  and  his  Committee  were  very  active  as  will 
appear  from  his  report  given  below : 

Your  Committee  on  Jurisprudence  and  Legislation  beg  leave  to  submit  the  follow- 
ing report  to  your  first  annual  convention: 

It  hardly  seems  necessary  for  us  to  preface  this  report  with  the  general  statement, 
the  truth  of  which  must  be  recognized  beforehand  by  all  who  have  given  any  thought 
to  the  subject,  that  the  work  of  this  Committee,  in  the  short  time  alloted  for  its 
accomplishment,  has  involved  a  large  amount  of  correspondence  and  no  little  diplomacy 
and  tact,  owing  to  the  fact  that  the  field  of  inquiry  and  investigation  has  been  so 
thoroughly  traversed  by  the  like  committee  of  the  National  Fraternal  Congress,  and 
some  insurance  departments  have  misunderstood  the  object  of  this  new  association 
of  fraternal  'Societies.  However,  we  take  pleasure  in  remarking  that  in  every  case, 
when  the  object  and  aims  of  the  Associated  Fraternities  have  been  courteously 
explained  to  the  insurance  commissioners  of  our  several  States,  your  committee  has 
received  prompt  and  kindly  replies  to  its  inquiries,  and  in  many  instances  have  been 
assured  of  the  hearty  cooperation  of  the  insurance  departments  in  the  general  efforts 
of  the  Associated  Fraternities  to  reach  a  common  basis  of  harmony  and  government 
satisfactory  to  the  Fraternities  on  the  one  hand  and  to  the  insurance  officials  on  the 
other.  At  the  outset,  therefore,  we  thank  such  insurance  officials  for  their  courtesy 
and  consideration. 

The  following  States  have  on  their  statute  books  what  is  known  as  the  National 
Fraternal  Congress  Old  Uniform  Bill,  before  its  minimum  rate  amendment,  with  here 
and  there  slight  modifications,  more  or  less  local  in  their  character,  but  not  seriously 
affecting  the  real  import  of  the  bill,  viz. :  Michigan,  Illinois,  Wisconsin,  Iowa,  Ne- 
braska, Missouri,  Kansas,  Ohio,  Pennsylvania,  New  York,  New  Jersey,  Connecticut, 
New  Hampshire,  District  of  Columbia,  Maryland,  Georgia,  Alabama  and  South 
Carolina. 

The  Kansas  law  provides  that  no  beneficiary  certificates  shall  be  issued  by  a  new 
association,  incorporated  thereunder,  until  its  benefit  fund  contains  in  cash  paid  in  an 
amount  equal  to  at  least  twice  the  death  benefit  promised  in  its  smallest  certificate; 
and  no  association  can  be  admitted  to  do  business  in  this  State  unless  it  is  shown 
that  one  assessment  upon  its  membership  at  the  specified  rates  will  produce  sufficient 
funds  to  pay  a  claim  in  full  under  its  largest  certificate.  The  Kansas  law  also  makes 
it  unlawful  for  any  association  to  use  any  portion  of  its  mortuary  or  emergency  fund 
for  expenses. 

The  South  Carolina,  Alabama  and  District  of  Columbia  laws  make  provision  for 
withdrawal  benefit  after  a  period  of  from  three  to  ten  years,  such  withdrawal  benefit 
not  to  exceed,  however,  the  amount  contributed  by  the  withdrawing  member. 

The  South  Carolina  law  is  similar  to  that  of  Ohio  and  some  other  States  in  the 
provision  that  no  order  can  be  authorized  to  do  business  within  this  State,  until  it  has 
on  deposit  to  the  credit  of  the  association  for  the  payment  of  death  and  other  claims, 
and  which  amount  cannot  be  used  for  expenses,  the  sum  of  five  thousand  dollars 
($5,000),  which  if  advanced  by  the  trustees  or  other  officers,  may  be  repaid  to  them 
from  the  proceeds  of  an  expense  fund  for  this  purpose. 

The  Maryland  law  contains  a  provision  that  no  society  can  be  authorized  to  do 
business  in  that  State,  if  it  ipromises  to  pay  any  withdrawal,  surrender,  endowment, 
old  age  or  other  benefit  besides  sickness,  accident  or  death,  unless  it  shall  have  first 
deposited  with  the  Insurance  Commissioner  the  sum  of  ten  thousand  dollars  in  divi- 


64 

dend-bearing  securities  satisfactory  to  said  Commissioner  as  a  guarantee  that  such 
certificates  will  be  paid  by  it.  However,  if  such  society  furnishes  satisfactory  evidence 
that  it  has  in  its  home  State  such  deposit  it  need  not  make  the  deposit  in  Maryland. 

So  far  as  the  Committee  has  been  able  to  ascertain,  the  following  States  have 
practically  no  law  governing  fraternal  beneficiary  societies,  viz. :  Rhode  Island  (pro- 
vided they  employ  no  paid  agents),  West  Virginia,  Oregon,  California,  Montana, 
Mississippi,  and  Florida. 

The  following  States  have  laws  exempting  fraternal  beneficiary  societies  from  the 
operation  of  the  insurance  laws,  but  require  annual  reports,  to-wit :  Virginia,  Delaware, 
and  Kentucky.  There  are  indications,  however,  that  the  day  of  reckoning  is  approach- 
ing in  some  of  these  States,  as  the*  Insurance  Commissioner  of  one  of  them  writes : 
"I  regret  to  say  this  department  has  no  jurisdiction  over  fraternal  organizations." 

Colorado  has  a  law  calling  for  the  filing  of  articles  of  incorporation  or  association 
of  fraternal  societies  and  providing  for  the  appointment  of  an  attorney  for  the  service 
of  process.  This  law  does  not  provide  for  the  filing  of  annual  reports,  though  it  is 
believed  that  the  general  insurance  laws  of  the  State  provide  for  this. 

The  Minnesota  law  places  our  societies  in  the  same  category  with  cooperative  life, 
endowment  and  casualty  companies,  a  classification  which  every  true  fraternalist  will 
repudiate. 

The  Wisconsin  law  is  especially  burdensome  in  a  financial  way,  as  it  provides  for 
the  collection  of  a  total  of  ninety-three  dollars  for  entrance  to  do  business  and  annual 
renewal  in  that  State — forty  dollars  of  which  goes  to  newspapers — truly  a  good  example 
of  the  power  of  the  press. 

The  State  of  South  Dakota  makes  its  general  assessment  insurance  law  applicable 
to  fraternal  beneficiary  societies — another  classification  which  many  of  the  up-to-date 
fraternalists  roundly  repudiate. 

And  now  we  come  to  the  legislation  recently  enacted  or  attempted.  The  National 
Fraternal  Congress  Bill,  as  amended  in  Boston,  prescribing  minimum  rates,  was 
adopted  last  winter  in  Maine,  Vermont,  Massachusetts,  Indiana,  North  Dakota,  Okla- 
homa and  Washington.  It  failed  in  Pennsylvania,  Wisconsin,  Missouri,  Nebraska, 
Wyoming,  Texas,  Minnesota  and  Oregon. 

Your  Committee  has  already  said  that  the  Associated  Fraternities  of  America  came 
into  existence  as  an  organization  none  too  soon.  On  March  21,  the  very  day  of  the 
organization  of  this  association,  the  new  National  Fraternal  Congress  Bill  went  into 
effect  in  Maine.  If  the  National  Fraternal  Congress  is  responsible  for  all  the  pro- 
visions of  the  Maine  enactment,  then  it  is  high  time  that  the  fraternals  of  America 
should  awake  to  the  danger  that  confronts  them  through  the  influence  of  the  Fraternal 
Congress.  The  first  section  of  the  Maine  law  timidly  announces  that  "Any  such 
fraternal  beneficiary  association  may  create,  maintain,  disburse  and  apply  a  reserve 
or  emergency  fund  in  accordance  with  its  by-laws  or  constitution."  Notwithstanding 
this  declaration  in  favor  of  self-government,  section  7  of  this  law  provides  as  follows : 
"Each  such  association  hereafter  organized  under  the  provisions  of  this  act,  shall,  on 
or  before  the  31  st  day  of  December  in  each  year,  deposit  with  the  State  Treasurer 
to  the  credit  of  its  emergency  or  reserve  fund  not  less  than  fifteen  per  cent  of  its 
total  mortuary  receipts  for  the  year  then  ending,  until  the  amount  so  deposited 
amounts  to  not  less  than  fifty  thousand  dollars  ($50,000) ." 

This  section  also  provides  that  "The  Insurance  Commissioner  shall  annually  in 
February  certify  to  the  Treasurer  of  State  the  minimum  amount  of  reserve  fund 
required  to  be  kept  on  deposit  in  the  treasury  by  each  association  doing  business  under 
this  act."  This  section  also  provides  the  manner  in  which  the  State  shall  proceed  to 
administer  these  funds  in  its  hands,  for  the  satisfying  of  judgments  against  the 
association  or  in  closing  up  the  affairs  of  the  society. 

The  law  enacted  in  the  State  of  Washington,  on. March  18,  1901,  is  the  Boston 
Fraternal  Congress  Bill  in  its  "Simon-pure"  form,  except  that  the  expenses  of  exami- 
nation is  made  two  hundred  dollars  in  associations  having  no  reserve  fund  and  four 
hundred  dollars  in  the  case  of  those  that  have  a  reserve  fund. 

The  Wyoming  legislature  at  its  last  session  enacted  a  law  similar  to  the  first 
National  Fraternal  Congress  Bill.  In  forwarding  the  Committee  a  copy  of  this  law, 
the  Auditor  of  State  significantly  writes :  "This  law  is  not  like  the  one  that  was  intro- 
duced. The  uniform  law  recommended  by  the  National  Fraternal  Congress  was 
introduced  in  its  entirety,  and  after  it  had  been  through  the  various  committees,  it 


65 

was  amended  and  finally,  the  one  enclosed  is  the  result."  Your  Committee  would  be 
pleased  to  thank  those  whose  influence  thus  saved  the  day  in  Wyoming. 

The  minimum  rate  measure  was  defeated  in  the  Texas  legislature  "on  account  of 
opposition  from  the  Societies  themselves,"  as  reported  to  your  Committee  by  the 
Commissioner  of  that  State.  The  Texas  legislature  passed  a  law  providing  for  can- 
cellation of  certificate  of  authority  upon  the  failure  of  a  fraternity  to  pay  any 
judgment. 

The  last  session  of  the  legislature  in  Arkansas  adopted  a  law  which  provides  that 
all  fraternal  beneficiary  orders  operating  in  that  State  shall  give  a  bond  of  ten  thousand 
dollars  to  the  State,  conditioned  upon  the  prompt  payment  of  claims  in  that  State. 

In  concluding  this  survey  of  statutes  in  force  or  attempted  for  the  regulation  of 
fraternal  beneficiary  societies  in  the  several  States  of  the  Union,  your  Committee 
desires  to  make  these  observations,  to-wit : 

1.  After  fifteen  years  of  legislation  proposed  and  urged  by  the  National  Fraternal 
Congress,  there  is  a  great  deal  of  non-uniformity  in  the  so-called  uniform  bill  now 
on  the  statute  books. 

2.  Owing  to  the  national  scope   and  character  of  fraternal  beneficiary  societies, 
there  is  the  most  urgent  need  of  statutory  legislation  that  shall  be  uniform,  not  in 
name  only,  but  in  fact  in  every  State  in  the  Union. 

3.  It  is   to  be  profoundly  regretted  that  the  National  Fraternal  Congress  should 
have  proposed  discriminatory  legislation  that  divides  the  fraternal  forces  of  America 
just  at  the  time  when  they  should  present  an  unbroken  front  before  the  entrenched 
hosts  of  our  common  enemy. 

4.  Every  true  fraternalist  will  welcome  any  just  plan  of  harmonizing  the  forces 
in   the    fraternal   field,    so    as    to    secure    statutory    legislation    that    shall    be    uniform 
throughout  our  common  country  in  its  application  to  all  fraternal  beneficiary  societies 
with  equal  force  and  effect. 

For  ten  years  there  was  bitter  contention  between  The  National  Fraternal  Congress 
and  the  Associated  Fraternities  of  America  in  respect  of  legislation  in  the  different 
States.  Where  the  National  Fraternal  Congress  would  undertake  to  have  the  uniform 
bill  adopted,  the  Representatives  of  the  Associated  Fraternities  of  America  would  appear 
in  opposition;  where  the  Associated  Fraternities  would  undertake  to  have  legislation 
with  regard  to  reserve  funds  and  the  permission  of  surrender  values,  then  the  Repre- 
sentatives of  the  National  Fraternal  Congress  would  appear  in  opposition; 

The  division  between  the  Fraternal  forces  was  extremely  unfortunate,  and  I  shall 
not  go  into  detail  of  the  history  of  legislation  during  the  ten  years  1901-1910.  I  come 
directly  to  the  joint  action  of  the  two  National  bodies  at  Mobile  in  connection  with 
the  Convention  of  Insurance  Commissioners  in  1910,  when  a  Uniform  Bill  was  agreed 
upon  between  these  three  National  Associations ;  that  is,  the  National  Fraternal  Con- 
gress, the  Associated  Fraternities  and  the  Convention  of  Insurance  Commissioners. 
The  results  of  this  Conference  and  agreement  was  a  bill  to  be  recommended  for 
enactment  in  the  several  States,  and  was  known  as  the  "Mobile  Bill."  At  the  Confer- 
ence in  Mobile  with  the  Insurance  Commissioners  the  representatives  of  the  National 
Fraternal  Congress  were  Chas.  E.  Piper  and  Abb  Landis.  The  representatives  of  the 
Associated  Fraternities  were  Arthur  Burnett,  Benjamin  D.  Smith,  Lee  W.  Squier, 
Robert  S.  lies,  George  Dyre  Eldridge.  In  1911  many  of  the  States  enacted  into  law 
the  Uniform  Bill  agreed  upon  at  Mobile.  However,  it  was  found  that  many  societies 
still  objected  to  some  of  the  provisions  of  the  Mobile  Bill,  and  a  general  conference 
of  representatives  of  the  National  Fraternal  Congress,  the  Associated  Fraternities  of 
America  and  the  Federated  Fraternities  were  held  in  New  York  late  in  1912,  and  a 
section  added  to  the  bill  providing  for  a  third  form  of  valuation,  and  known  as  section 
23b  of  the  "New  York  Conference  Bill."  There  was  a  large  gathering  of  Fraternal  rep- 
resentatives in  New  York,  the  National  Fraternal  Congress  and  the  Associated  Frater- 


66* 

nities  being  represented  by  the  same  gentlemen  who  represented  those  bodies  in  Mobile 
''n  1910.  The  New  York  Conference  Bill  has  been  enacted  into  law  in  a  number  of  States. 
The  main  features  of  the  Mobile  Bill  and  the  New  York  Conference  Bill,  which  dis- 
tinguish those  measures  from  any  other  heretofore  recommended  by  the  Congress  or 
other  Fraternal  bodies,  were  the  provisions  for  valuation.  The  following  are  the  main 
provisions  of  the  New  York  Conference  Bill : 

THE  NEW   YORK   CONFERENCE   BILL. 

Section  i.  (Fraternal  Benefit  Societies  Defined.)  Any  corporation,  society,  order 
or  voluntary  association,  without  capital  stock,  organized  and  carried  on  solely  for 
the  mutual  benefit  of  its  members  and  their  beneficiaries,  and  not  for  profit,  and 
having  a  lodge  system  with  ritualistic  form  of  work  and  representative  form  of  gov- 
ernment, and  which  shall  make  provision  for  the  payment  of  benefits  in  accordance 
with  Section  5  hereof,  is  hereby  declared  to  be  a  Fraternal  Benefit  Society. 

Section  2.  (Lodge  System  Defined.)  Any  society  having  a  supreme  governing 
or  legislative  body  and  subordinate  lodges  or  branches  by  whatever  name  known, 
into  which  members  shall  be  elected,  initiated  and  admitted  in  accordance  with  its  con- 
stitution, laws,  rules,  regulations  and  prescribe  ritualistic  ceremonies,  which  subor- 
dinate lodges  or  branches  shall  be  required  by  the  laws  of  such  society  to  hold  regular 
or  stated  meetings  at  least  once  in  each  month,  shall  be  deemed  to  be  operating  on 
the  lodge  system. 

Section  3.  (Representative  Form  of  Government  Defined.)  Any  such  society  shall 
be  deemed  to  have  a  representative  form  of  government  when  it  shall  provide  in  its 
constitution  and  laws  for  a  supreme  legislative  or  governing  body,  composed  of  repre- 
sentatives elected  either  by  the  members  or  by  delegates  elected  directly  or  indirectly 
by  the  members,  together  with  such  other  members  as  may  be  prescribed  by  its  con- 
stitution and  laws;  provided,  that  the  elective  members  shall  constitute  a  majority  in 
number  and  have  not  less  than  two-thirds  of  the  votes,  nor  less  than  the  votes 
required  to  amend  its  constitution  and  laws;  and  provided  further,  that  the  meetings 
of  the  supreme  or  governing  body,  and  the  election  of  officers,  representatives  or 
delegates  shall  be  held  as  often  as  once  in  four  years.  The  members,  officers,  repre- 
sentatives or  delegates  of  a  fraternal  benefit  society  shall  not  vote  by  proxy. 

Section  4.  (Exemptions.)  Except  as  herein  provided,  such  societies  shall  be  gov- 
rened  by  this  Act,  and  shall  be  exempt  from  all  provisions  of  the  insurance  laws  of 
this  State,  not  only  in  governmental  relations  with  the  State,  but  for  every  other 
purpose,  and  no  law  hereinafter  enacted  shall  apply  to  them,  unless  they  be  expressly 
designated  therein. 

Section  5.  (Benefits.)  Subsection  i.  Every  Society  transacting  business  under 
this  act  shall  provide  for  the  payment  of  death  benefits,  and  may  provide  for  the  pay- 
ment of  benefits  in  case  of  temporary  or  permanent  physical  disability,  either  as  the 
result  of  disease,  accident  or  old  age;  provided,  the  period  of  life  at  which  the  pay- 
ment of  benefits  for  disability  on  account  of  old  age  shall  commence,  shall  not  be 
under  seventy  years,  and  may  provide  for  monuments  or  tombstones  to  the  memory 
of  its  deceased  members,  and  for  the  payment  of  funeral  benefits.  Such  Society 
shall  have  the  power  to  give  a  member,  when  permanently  disabled  or  on  attaining  the 
age  of  seventy,  all,  or  such  portion  of  the  face  value  of  his  certificate  as  the  laws 
of  the  Society  may  provide;  provided,  that  nothing  in  this  act  contained  shall  be  so 
construed  as  to  prevent  the  issuing  of  benefit  certificates  for  a  term  of  years  less  than 
the  whole  of  life  which  are  payable  upon  the  death  or  disability  of  the  member  ^oc- 
curring  within  the  term  for  which  the  benefit  certificate  may  be  issued.  Such  Society 
shall,  upon  written  application  of  the  member,  have  the  power  to  accept  a  part  of  the 
periodical  contributions  in  cash,  and  charge  the  remainder,  not  exceeding  one-half 
of  the  periodical  contribution,  'against  the  certificate  with  interest  payable  or  com- 
pounded annually  at  a  rate  not  lower  than  four  per  cent  per  annum ;  provided,  that 
this  privilege  shall  not  be  granted  except  to  Societies  which  have  readjusted  or  may 
hereafter  readjust  their  rates  of  contributions,  and  to  contracts  affected  by  such 
readjustment. 

Subsection  2.  Any  Society  which  shall  show  by  the  annual  valuation  hereinafter 
provided  for  that  it  is  accumulating  and  maintaining  the  reserve  not  lower  than  the 


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usual  reserve  computed  by  the  American  Experience  Table  and  four  per  cent  in- 
terest, may  grant  to  its  members  extended  and  paidup  protection,  or  such  withdrawal 
equities  as  its  constitution  and  laws  may  provide;  provided,  that  such  grants  shall 
in  no  case  exceed  in  value  the  portion  of  the  reserve  to  the  credit  of  such  members 
to  whom  they  are  made. 

Section  6  provides  for  the  payment  of  death  benefits  for  wife,  husband,  relative 
by  blood  to  the  fourth  degree,  father-in-law,  mother-in-law,  son-in-law,  daughter-in- 
law,  stepfather,  stepmother,  stepchildren,  children  by  legal  adoption,  or  to  a  person 
or  persons  dependent  upon  the  member;  provided,  that  if  after  the  issuance  of  the 
original  certificate  the  member  shall  become  dependent  upon  an  incorporated  charitable 
institution,  he  shall  have  the  privilege,  with  the  consent  of  the  society,  to  make  such 
institution  his  beneficiary. 

Section  7  provides  that  any  society  may  admit  to  beneficial  membership  any  person 
not  less  than  sixteen  and  not  more  than  sixty  years  of  age,  who  has  been  examined 
by  a  legally  qualified  physician. 

Section  8  provides  that  every  certificate  issued  by  any  society  shall  specify  the 
amount  of  benefit  provided  thereby,  and  shall  provide  that  the  certificate,  the  charter 
or  articles  of  incorporation,  or,  if  a  voluntary  association,  the  articles  of  association, 
the  constitution  and  laws  of  the  society  and  the  application  for  membership  and  medical 
examination,  signed  by  the  applicant,  and  all  amendments  to  each  thereof,  shall  con- 
stitute the  agreement  between  the  society  and  the  member. 

SECTION  9.  (Funds.)  SUBSECTION  I.  Any  society  may  create,  maintain,  invest, 
disburse  and  apply  an  emergency,  surplus  or  other  similar  fund  in  accordance  with 
its  laws.  Unless  otherwise  provided  in  the  contract  such  funds  shall  be  held,  invested 
and  disbursed  for  the  use  and  benefit  of  the  society,  and  no  member  or  beneficiary 
shall  have  or  acquire  individual  rights  therein  or  become  entitled  to  any  apportionment 
or  the  surrender  of  any  part  thereof,  except  as  provided  in  Subsection  2  of  Section 
5  of  this  Act.  The  funds  from  which  benefits  shall  be  paid  and  the  funds  from  which 
the  expenses  of  the  society  shall  be  defrayed  shall  be  derived  from  periodical  or  other 
payments  by  the  members  of  the  society  and  accretions  of  said  funds ;  provided,  that 
no  society,  domestic  or  foreign,  shall  hereafter  be  incorporated  or  admitted  to  transact 
business  in  this  State  which  does  not  provide  for  stated  periodical  contributions  suffi- 
cient to  provide  for  meeting  the  mortuary  obligations  contracted,  when  valued  upon 
the  basis  of  the  National  Fraternal  Congress  Table  of  Mortality  as  adopted  by  the 
National  Fraternal  Congress  August  23,  1899,  or  any  higher  standard,  with  interest 
assumption  not  more  than  four  per  cent  per  annum,  or  write  or  accept  members  for 
temporary  or  permanent  disability  benefits  except  upon  tables  based  upon  reliable 
experience,  with  an  interest  assumption  not  higher  than  4  per  cent  per  annum. 

SUBSECTION  2.  Deferred  payments  or  installments  of  claims  shall  be  considered 
as  fixed  liabilities  on  the  happening  of  the  contingency  upon  which  such  payments  or 
installments  are  thereafter  to  be  paid.  Such  liability  shall  be  the  present  value  of 
such  future  payments  or  installments  upon  the  rate  of  interest  and  mortality  assumed 
by  the  society  for  valuation,  and  every  society  shall  maintain  a  fund  sufficient  to 
meet  such  liability  regardless  of  proposed  future  collections  to  meet  any  such  lia- 
bilities. 

Section  10  provides  for  the  investment  of  funds. 

Section  n  provides  that  the  payments  by  members,  in  whatever  form  made,  shall 
distinctly  state  the  purpose  of  the  same  and  the  proportion  thereof  which  may  be 
used  for  expenses,  and  that  no  part  of  the  money  collected  for  mortuary  or  dis- 
ability purposes  or  the  net  accretions  of  (on)  either  or  any  of  said  funds  shall  be  used 
for  expenses. 

Section  12  provides  for  the  organization  of  societies  with  not  less  than  seven 
persons,  a  majority  of  whom  are  citizens  of  the  State,  and  that  the  application  for 
the  charter  must  give  the  proposed  name  of  the  society,  the  purpose  for  which  it  is 
formed  and  the  names,  residences,  official  titles  of  all  the  officers,  trustees,  directors 
or  other  persons  who  are  to  have  and  exercise  the  general  control  and  management 
of  the  affairs  and  that  such  articles  of  incorporation  and  a  bond  in  the  sum  of  five 
thousand  dollars,  with  sureties  approved  by  the  Superintendent  of  Insurance,  shall 
be  filed  with  the  Superintendent  of  Insurance.  But  that  its  certificate  shall  not  be 


68 

issued  until  there  have  been  secured  at  least  500  lives  for  at  least  $1,000  each,  and 
also  applicants  for  death  benefits  have  been  regularly  examined  by  legally  qualified 
practicing  physicians,  nor  until  there  shall  be  established  ten  subordinate  lodges  or 
branches  into  which  said  five  hundred  applicants  have  been  initiated,  nor  until  there 
has  been  submitted  to  the  Superintendent  of  Insurance,  under  oath  of  the  President 
and  Secretary,  a  list  of  such  applicants,  giving  their  names,  addresses,  date  examined, 
date  approved,  ^date  initiated,  name  and  number  of  the  subordinate  branch  of  which 
each  applicant  is  a  member,  the  amount  of  benefits  to  be  granted,  the  rate  of  stated 
periodical  contributions,  which  latter  shall  be  sufficient  to  provide  for  meeting  the 
mortuary  obligation  contracted,  when  valued  for  death  benefits  upon  the  basis  of  the 
National  Fraternal  Congress  Table  of  Mortality,  as  adopted  by  the  National  Fra- 
ternal Congress  August  23,  1899,  or  any  higher  standard  at  the  option  of  the  society, 
and  for  disability  benefits  by  tables  based  upon  reliable  experience  and  for  combined 
death  'and  permanent  total  disability  benefits  by  tables  based  upon  reliable  experience, 
with  an  interest  assumption  not  higher  than  4  per  cent  per  annum.  Then  follows 
the  usual  preliminaries  -provided  in  the  Uniform  Bill  before  the  society  can  commence 
business. 

Section  13  provides  that  any  society  now  engaged  in  transacting  business  in  this 
State  may  exercise,  after  the  passage  of  this  Act,  'all  of  the  rights  conferred  thereby, 
and  all  of  the  rights,  powers,  and  privileges  now  exercised  or  possessed  by  it  under 
its  charter  or  articles  of  incorporation  not  inconsistent  with  this  Act,  if  it  be  incor- 
porated ;  or,  if  it  be  a  voluntary  association,  it  may  incorporate  hereunder. 

Section  14  relates  to  mergers  and  transfers. 

Section  15  provides  for  an  annual  license. 

Section  16  provides  for  admission  of  a  foreign  society. 

Section  17  provides  for  power  of  attorney  and  service  of  process. 

Section  18  provides  for  the  place  of  meeting  and  location  of  office. 

Section  19  provides  that  there  shall  be  no  personal  liability  incurred  by  officers 
and  members  of  the  supreme,  grand  or  any  other  subordinate  body  of  any  such 
society. 

Section  20  provides  that  no  subordinate  body  nor  any  of  its  subordinate  officers 
or  members  shall  have  the  >DOwer  or  authority  to  waive  any  of  the  provisions  of 
the  laws  and  constitution  of  the  society. 

Section  21  provides  that  no  money  or  other  benefits  shall  be  liable  to  'attachment, 
garnishment  or  other  process,  or  be  seized,  taken,  appropriated  or  applied  by  any  legal 
or  eauitable  process  or  operation  of  law  to  pay  anv  debt  or  liability  of  a  member  or 
beneficiary,  or  'any  other  person  who  may  have  a  right  thereunder,  either  before  or 
after  payment. 

Section  22  provides  for  the  amendment  of  the  constitution  and  laws. 

SECTION  23.  (Annual  Reports.)  Every  society  transacting  business  in  this  State 
shall  annually,  on  or  before  the  first  day  of  March,  file  with  the  Superintendent  of  In- 
surance, in  such  form  as  he  may  require,  'a  statement  under  oath  of  its  President  and 
Secretarv  or  corresponding  officers,  of  its  condition  and  standing  on  the  thirty-first 
day  of  December  next  preceding,  and  of  its  transactions  for  the  vear  ending  on  that 
date,  and  also  shall  furnish  such  other  information  as  the  Superintendent  may  deem 
necessary  to  a  proper  exhibit  of  its  business  and  plan  of  working.  The  Superintendent 
mav  at  other  times  require  any  further  statement  he  may  deem  necessary  to  be  made 
relating  to  such  society. 

In  'addition  to  the  annual  report  herein  required,  each  society  shall  annually 
report -to  the  Superintendent  a  valuation  of  its  certificates  in  force  on  December  3ist, 
last  preceding;  excluding  those  issued  within  the  year  for  which  the  report  is  filed, 
in  cases  where  the  contributions  for  the  first  year  in  whole  or  in  part  are  used  for 
current  mortality  and  expenses;  provided,  the  first  report  of  valuation  shall  be  made 
as  of  December  31,  1912.  Such  report  of  valuation  shall  show,  as  contingent  liabilities, 
the  present  mid-year  value  of  the  rvromised  benefits  provided  in  the  constitution 
and  laws  of  such  society  under  certificates  then  subject  to  valuation;  and,  as  con- 
tingent assets,  the  present  mid-year  value  of  the  future  net  contributions  provided  in 
the  constitution  and  laws  as  the  same  'are  in  practice  actually  collected.  At  the  option 
of  any  society,  in  lieu  of  the  above,  the  valuation  mav  show  the  net  value,  and  when 
computed  in  case  of  monthly  contributions  may  be  the  mean  of  the  terminal  values 
for  the  end  of  the  preceding  and  of  the  current  insurance  years. 


69 

Such  valuation  shall  be  certified  by  a  competent  accountant  or  actuary,  or,  at  the 
request  and  expense  of  the  society,  verified  by  the  actuary  of  the  Department  of  In- 
surance of  the  home  State  of  the  society,  and  shall  be  filed  with  the  Superintendent 
within  ninety  days  after  the  submission  of  the  last  preceding  annual  report.  The 
legal  minimum  standard  of  valuation  for  all  certificates,  except  for  disability  benefits, 
shall  be  the  National  Fraternal  Congress  Table  of  Mortality  as  adopted  by  the  Na- 
tional Fraternl  Congress  August  23,  1899,  or,  at  the  option  of  the  society,  any 
higher  table ;  or,  at  its  option,  it  may  use  a  table  based  upon  the  society's  own  ex- 
perience of  at  least  twenty  years  and  covering  not  less  than  one  hundred  thousand 
lives,  with  interest  assumption  not  more  than  4  per  centum  per  annum.  Each  such 
valuation  report  shall  set  forth  clearly  and  fully  the  mortality  and  interest  basis  and 
the  method  of  valuation.  Any  society  providing  for  disability  benefits  shall  keep 
the  net  contributions  for  such  benefits  in  a  fund  separate  and  apart  from  all  other 
benefit  and  expense  funds  and  the  valuation  of  all  other  business  of  the  society; 
provided,  that  where  a  combined  contribution  table  is  used  by  a  society  for  both 
death  and  permanent  total  disability  benefits  the  valuation  shall  be  according  to  tables 
of  reliable  experience  and  in  such  case  a  separation  of  the  funds  shall  not  be  required. 

The  valuation  herein  provided  for  shall  not  be  considered  or  regarded  as  a  test 
of  the  financial  solvency  of  the  society,  but  each  society  shall  be  held  legally  solvent 
so  long  as  the  funds  in  its  possession  are  equal  to  or  in  excess  of  its  matured 
liabilities. 

Beginning  with  the  year  1914,  a  report  of  such  valuation  and  an  explanation  of 
the  facts  concerning  the  condition  of  the  society  thereby  disclosed  shall  be  printed 
and  mailed  to  each  beneficiary  member  of  the  society  not  later  than  June  ist  of  each 
year ;  or,  in  lieu  thereof,  such  report  of  valuation  and  showing  of  the  society's  con- 
dition as  thereby  disclosed  may  be  published  in  the  society's  official  paper  and  the 
issue  containing  the  same  mailed  to  each  beneficiary  member  of  the  society.  The 
laws  of  such  society  shall  provide  that  if  the  stated  periodical  contributions  of  the 
members  are  insufficient  to  pay  all  matured  death  and  disability  claims  in  full,  and 
to  provide  for  the  creation  and  maintenance  of  the  funds  required  by  its  laws, 
additional,  increased  or  extra  rates  of  contributions  shall  be  collected  from  the  mem- 
bers to  meet  such  deficiency ;  and  such  laws  may  provide  that,  upon  the  written 
application  or  consent  of  the  member,  his  certificate  may  be  charged  with  its  propor- 
tion of  any  deficiency  disclosed  by  valuation,  with  interest  not  exceeding  5  per  centum 
per  annum. 

SECTION  233.  (Provisions  to  Insure  Future  Security.)  If  the  valuation  of  the 
certificates,  as  hereinbefore  provided,  on  December  31,  1917,  shall  show  that  the 
present  value  of  future  net  contributions,  together  with  the  admitted  assets,  is  less 
than  the  present  value  of  the  promised  benefits  and  accrued  liabilities,  such  society 
shall  ^hereafter  maintain  said  financial  condition  at  each  succeeding  triennial  valua- 
tion in  respect  of  the  degree  of  deficiency  as  shown  in  the  valuation  as  of  December 
31,  1917.  If  at  any  succeeding  triennial  valuation  such  society  does  not  show  at 
least  the  same  condition  the  Supterintendent  shall  direct  that  "it  thereafter  comply 
with  the  requirements  herein  specified.  If  the  next  succeeding  triennial  valuation 
after  the  receipt  of  such  notice  shall  show  that  the  society  has  failed  to  maintain 
the  condition  required  herein  the  Superintendent  may,  in  the  absence  of  good  cause 
shown  for  such  failure,  institute  proceedings  for  the  dissolution  of  such  society, 
in  accordance  with  the  provision  of  Section  24  of  this  Act,  or,  in  the  case  of  a  foreign 
society,  its  license  may  be  cancelled  in  the  manner  provided  in  this  Act 

Any  such  society,  shown  by  any  triennial  valuation,  subsequent  to  December  31, 
1917,  not  to  have  maintained  the  condition  herein  required,  shall,  within  two  years 
thereafter,  make  such  improvement  as  to  show  a  percentage  of  deficiency  not  greater 
than  as  of  December  31,  1917,  or  thereafter,  as  to  all  new  members  admitted,  be  sub- 
ject, so  far  as  stated  rates  of  contributions  are  concerned,  to  the  provisions  of  Sec- 
tion 12  of  this  Act,  applicable  in  the  organization  of  new  societies ;  provided,  that  the 
net  mortuary  or  beneficiary  contributions  and  funds  of  such  new  members  shall  be 
kept  separate  and  apart  from  the  other  funds  of  the  society.  If  such  required  im- 
provement is  not  shown  by  the  succeeding  triennial  valuation,  then  the  said  new 
members  may  be  placed  in  a  separate  class  and  their  certificates  valued  as  an  in- 
dependent society  in  respect  of  contributions  and  funds. 

SECTION  23b.  In  lieu  of  the  requirements  of  Sections  23  and  233,  any  society, 
accepting  in  its  laws  the  provisions  of  this  section,  may  value  its  certificates  on  a 


70 

basis,  herein  designated  "accumulation  basis,''  by  crediting  each  member  with  the 
net  amount  contributed  for  each  year  and  with  interest  at  approximately  the  net 
rate  earned  and  by  charging  him  with  his  share  of  the  losses  for  each  year,  herein 
designated  "cost  of  insurance,"  and  carrying  the  balance,  if  any,  to  his  credit.  The 
charge  for  the  cost  of  insurance  may  be  according  to  the  actual  experience  of  the 
society  applied  to  a  table  of  mortality  recognized  by  the  law  of  this  State,  and  shall 
take  into  consideration  the  amount  at  risk  during  each  year,  which  shall  be  the 
amount  payable  at  death  less  the  credit  to  the  member.  Except  as  specifically  pro- 
vided in  its  articles  or  laws  or  contracts  no  charge  shall  be  carried  forward  from 
the  first  valuation  hereunder  against  any  member  for  any  past  share  of  losses  ex- 
ceeding the  contributions  and  credit.  If,  after  the  first  valuation,  any  member's 
share  of  losses  for  any  year  exceeds  his  credit  including  the  contribution  for  the 
year,  the  contribution  shall  be  increased  to  cover  his  share  of  the  losses.  Any  such 
excess  share  of  losses  chargeable  to  any  member  may  be  paid  out  of  a  fund  or 
contributions  especially  created  or  required  for  such  purpose. 

Any  member  may  transfer  to  any  plan  adopted  by  the  society  with  net  rates  on 
which  tabular  reserves  are  maintained  and  on  such  transfer  shall  be  entitled  to  make 
such  application  of  his  credit  as  provided  in  the  laws  of  the  society. 

Certificates  issued,  rerated  or  readjusted  on  a  basis  providing  for  adequate  rates 
with  adequate  reserves  to  mature  such  certificates  upon  assumptions  for  mortality 
and  interest  recognized  by  the  law  of  this  State  shall  be  valued  on  such  basis,  herein 
designated  the  "Tabular  Basis" ;  provided,  that  if  on  the  first  valuation  under  this 
section  a  deficiency  in  reserve  shall  be  shown  for  any  such  certificate  the  same  shall 
be  valued  on  the  accumulation  basis. 

Whenever  in  any  society  having  members  upon  the  tabular  basis  and  upon  the 
accumulation  basis  the  total  of  all  costs  of  insurance  provided  for  any  year  shall 
be  insufficient  to  meet  the  actual  death  and  disability  losses  for  the  year,  the  deficiency 
shall  be  met  for  the  year  from  the  available  funds  after  setting  aside  all  credits 
in  the  reserve;  or  from  increased  contributions  or  by  an  increase  in  the  number  of 
assessments  applied  to  the  society  as  a  whole  or  to  classes  of  members  as  may  be 
specified  in  its  laws.  Savings  from  a  lower  amount  of  death  losses  may  be  returned 
in  like  manner  as  may  be  specified  in  its  laws. 

If  the  laws  of  the  society  so  provide,  the  assets  representing  the  reserves  of  any 
separate  class  of  members  may  be  carried  separately  for  such  class  as  if  in  an 
independent  society,  and  the  required  reserve  accumulation  of  such  class  so  set 
apart  shall  not  thereafter  be  mingled  with  the  assets  of  other  classes  of  the  society. 

A  table  showing  the  credits  to  individual  members  for  each  age  and  year  of 
entry  and  showing  opposite  each  credit  the  tabular  reserve  required  on  the  whole 
life  or  other  plan  of  insurance  specified  in  the  contract,  according  to  assumptions 
for  mortality  and  interest  recognized  by  the  law  of  this  State  and  adopted  by  the 
society,  shall  be  filed  by  the  society  with  each  annual  report  and  also  be  furnished  to 
each  member  before  July  ist  of  each  year. 

In  lieu  of  the  aforesaid  statement  there  may  be  furnished  to  each  member  within 
the  same  time  a  statement  giving  the  credit  for  such  member  and  giving  the  tabular 
reserve  and  level  rate  required  for  a  transfer  carrying  out  the  plan  of  insurance 
specified  in  the  contract.  No  table  or  statement  need  be  made  or  furnished  where 
the  reserves  are  maintained  on  the  tabular  basis. 

For  this  purpose  individual  bookkeeping  accounts  for  each  member  shall  not  be 
required  and  all  calculations  may  be  made  by  actuarial  methods. 

Nothing  herein  contained  shall  prevent  the  maintenance  of  such  surplus  over 
and  above  the  credits  on  the  accumulation  basis  and  the  reserves  on  the  tabular 
basis  as  the  society  may  provide  by  or  pursuant  to  its  laws ;  nor  be  construed  as 
giving  to  the  individual  member  any  right  or  claim  to  any  such  reserve  or  credit 
other  than  in  manner  as  expressed  in  the  contract  and  its  laws;  nor  as  making  any 
such  reserve  or  credits  a  liability  in  determining  the  legal  solvency  of  the  society. 

SECTION  24.  (Examination  of  Domestic  Societies.)  The  Superintendent  of  In- 
surance, or  any  person  he  may  appoint,  shall  have  the  power  of  visitation  and 
examination  into  the  affairs  of  any  domestic  society.  He  may  employ  assistants  for 
the  purpose  of  such  examination,  and  he.  or  any  person  he  may  appoint,  shall  have 
free  access  to  all  the  books,  papers  and  documents  that  relate  to  the  business  of 


71 

the  society  and  may  summon  and  qualify  as  witness  under  oath  and  examine  its 
officers,  agents  and  employees  or  other  persons  in  relation  to  the  affairs,  transactions 
and  conditions  of  the  society. 

The  expense  of  such  examination  shall  be  paid  by  the  society  examined,  upon 
statement  furnished  by  the  Superintendent  of  Insurance,  and  the  examination  shall 
be  made  at  least  once  in  three  years. 

Whenever,  after  examination,  the  Superintendent  of  Insurance  is  satisfied  that 
any  domestic  society  has  failed  to  comply  with  any  provisions  of  this  Act,  or  is  ex- 
ceeding its  powers,  or  is  not  carrying  out  its  contract  in  good  faith,  or  is  transacting 
business  fraudulently:  or  whenever  any  domestic  society,  after  the  existence  of  one 
yeatf  or  more,  shall  have  a  membership  of  less  than  400  (or  shall  determine  to  dis- 
continue business),  the  Superintendent  of  Insurance  may  present  the  facts  relating 
thereto  to  the  Attorney-General,  who  shall,  if  he  deem  the  circumstances  warrant, 
commence  an  action  in  quo  warranto  in  a  court  of  competent  jurisdiction,  and  such 
court  shall  thereupon  notify  the  officers  of  such  society  of  a  hearing,  and  if  it  shall 
then  appear  that  such  society  should  be  closed,  said  society  shall  be  enjoined  from 
carrying  on  any  further  business  and  some  person  shall  be  appointed  receiver  of  such 
society,  and  shall  proceed  at  once  to  take  possession  of  the  books,  papers,  moneys  and 
other  assets  of  the  society  and  to  distribute  its  funds  to  those  entitled  thereto.  ^ 

No  such  proceedings  shall  be  commenced  by  the  Attorney-General  against  any 
such  society  until  after  notice  has  been  duly  served  on  the  chief  executive  officers  of 
the  society  and  a  reasonable  opportunity  given  to  it,  on  a  date  to  be  named  in  said 
notice,  to  show  cause  why  such  proceedings  should  not  be  commenced. 

SECTION  25.  (Application  for  Receiver,  etc.)  No  application  for  injunction  against 
or  proceedings  for  the  dissolution  of,  or  the  appointment  of  a  receiver  for  any  such 
domestic  society,  or  branch  thereof,  shall  be  entertained  by  any  court  in  this  State 
unless  the  same  is  made  by  the  Attorney-General. 

SECTION  26.  (Examination  of  Foreign  Societies.)  The  Superintendent  of  Insur- 
ance, or  any  person  whom  he  may  appoint,  may  examine  any  foreign  society  trans- 
acting or  applying  for  admission  to  transact  business  in  this  State.  The  said  Super- 
intendent may  employ  assistants  and  he,  or  any  person  he  may  appoint,  shall  have 
free  access  to  all  the  books,  papers  and  documents  that  relate  to  the  business  of  the 
society,  and  may  summon  and  qualify  as  witness  under  oath  and  examine  its  officers, 
agents  and  employes  and  other  persons  in  relation  to  the  affairs,  transactions  and  con- 
ditions of  the  society.  He  may,  in  his  discretion,  accept  in  lieu  of  such  examination 
the  examination  of  the  Insurance  Department  of  the  State,  territory,  district,  province 
or  country  where  such  society  is  organized.  The  actual  expenses  of  examiners  making 
any  such  examination  shall  be  paid  by  the  society  upon  statement  furnished  by  the 
Superintendent  of  Insurance. 

If  any  such  society  or  its  officers  refuse  to  submit  to  such  examination  or  to  com- 
ply with  the  provisions  of  the  section  relative  thereto,  the  authority  of  such  society 
*o  wf'to  n°w  bu-iness  in  this  State  shnll  be  suspender!  or  license  refused  until  satis- 
factory evidence  is  furnished  the  Sunerintendent  relating  fo  the  condition  and  affairs 
of  the  society,  and  during  such  suspension  the  society  shall  not  write  new  business 
in  this  State. 

SECTION  27.  (No  adverse  Publications.)  Pending,  during  or  after  an  examination 
or  investigation  of  any  such  society,  either  domestic  or  foreign,  the  Superintendent  of 
Insurance  shall  make  public  no  financial  statement,  report  or  finding,  nor  shall  he 
permit  to  become  public  any  financial  statement,  report  or  finding  affecting  the  status, 
standing  or  rights  of  ^  any  such  society,  until  a  copy  thereof  shall  have  been  served 
upon  such  society  at  its  home  office,  nor  until  such  society  shall  have  been  afforded 
a  reasonable  opportunity  to  answer  any  such  financial  statement,  report  or  finding, 
and  to  make  such  showing  in  connection  therewith  as  it  may  desire. 

SECTION  28.  (Revocation  of  License.)  When  the  Supterintendent  of  Insurance 
on  investigation  is  satisfied  that  any  foreign  society  transacting  business  under  this 
Act  has  exceeded  its  powers,  or  has  failed  to  comply  with  any  provisions  of  this 
Act,  or  is  conducting  business  fraudulently,  or  is  not  carrying  out  its  contract  in 
good  faith,  he  shall  notify  the  society  of  his  findings,  and  state  in  writing  the  grounds 
of  his  dissatisfaction,  and  after  reasonable  notice  require  said  society,  on  a  date  named, 
to  show  cause  why  its  license  should  not  be  revoked.  If  on  the  date  named  in  said 


72 

notice  such  objections  have  not  been  removed  to  the  satisfaction  of  the  said  Superin- 
tendent, or  the  society  does  not  present  good  and  sufficient  reasons  why  its  authority 
to  transact  business  in  this  State  should  not  at  that  time  be  revoked,  he  may  revoke 
the  authority  of  the  society  to  continue  business  in  this  State.  All  decisions  and 
findings  of  the  Superintendent  made  under  the  provisions  of  this  section  may  be 
reviewed  by  proper  proceedings  in  any  court  of  competent  jurisdiction,  as  provided 
in  Section  16  of  this  Act. 

Section  29  provides  for  the  exemption  of  certain  societies,  such  as  the  Masons, 
Odd  Fellows  or  Knights  of  Pythias  (exclusive  of  the  Insurance  Department)  and 
the  Junior  Order  of  United  American  Mechanics  (exclusive  of  the  Beneficiary  Degree 
or  Insurance  Branch),  and  societies  which  limit  their  membership  to  any  one  hazardous 
occupation,  of  to  similar  societies  which  do  not  issue  insurance  certificate,  nor  to  an 
association  of  local  lodges  of  a  society  now  doing  business  in  this  State  which  pro- 
vides death  benefits  not  exceeding  five  hundred  dollars  to  any  one  person,  or  dis- 
ability benefits  not  exceeding  three  hundred  dollars  in  any  one  year  to  any  one  per- 
son, or  both,  nor  to  any  contracts  of  re-insurance  business  on  such  plan  in  this  State, 
nor  to  domestic  societies  which  limit  their  membership  to  the  employes  of  a  particular 
city  or  town,  designated  firm,  business  house  or  corporation,  nor  to  orders  or  asso- 
ciations of  a  purely  religious,  charitable  and  benevolent  description  which  do  not  pro- 
vide for  a  death  benefit  of  more  than  one  hundred  dollars  or  for  disability  benefits  of 
more  than  one  hundred  and  fifty  dollars  to  any  one  person  in  any  one  year. 

Section  29  also  provides  that  any  fraternal  benefit  society  heretofore  organized  and 
incorporated  and  operating  within  the  definition  set  forth  in  Sections  I,  2  and  3 
of  this  Act  and  providing  for  benefits  in  case  of  death  or  disability  resulting  solely  from 
accidents,  but  which  does  not  obligate  itself  to  pay  death  or  sick  benefits,  may  be  licensed 
under  the  provisions  of  this  Act,  and  shall  have  all  the  privileges  and  shall  be  subject 
to  all  the  provisions  and  regulations  of  this  Act,  except  that  the  provisions  of  this  Act 
requiring  medical  examinations,  valuations  of  benefit  certificates,  and  that  the  certificate 
shall  specify  the  amount  of  benefits,  shall  not  ap-ply  to  such  society. 

Section  30  provides  that  every  fraternal  benefit  society  organized  or  licensed  under 
this  Act  is  hereby  declared  to  be  a  charitable  and  benevolent  institution,  and  all  of  its 
funds  shall  be  exempt  from  all  and  every  State,  county,  district,  municipal  and  school 
tax,  other  than  taxes  on  real  estate  and  office  equipment. 

Section  31  provides  for  penalties  for  the  violations  of  any  of  the  provisions  of 
the  Act. 

.  Section  32  repeals  all  Acts  or  parts  of  Acts  inconsistent  with  this  Act. 

To  July  i,  1913,  the  "New  York  Conference  Bill"  had  been  enacted  into  law  by 
Arizona,  Connecticut,  Idaho,  Michigan,  New  Hampshire,  New  York,  North  Carolina, 
North  Dakota,  Rhode  Island,  Tennessee,  Texas,  Wisconsin,  and  Wyoming — 13. 

To  the  same  date  the  "Mobile  Bill"  (which  does  not  include  Section  23b,  but 
requires  annual  valuation  and  triennial  improvement  of  5  per  cent  if  degree  of  sol- 
vency is  below  90  per  cent)  had  been  enacted  into  law  by  Alabama,  California, 
Colorado,  Louisiana,  Maryland,  Missouri,  Montana,  Ohio,  Oregon,  Utah,  and  Wash- 
ington— II. 

Massachusetts  had  enacted  a  law  virtually  the  same  as  the  "Mobile  Bill,"  ex- 
cepting 233— i. 

The  "N.  F.  C.  Uniform  Bill"  had  been  enacted  into  law  by  Indiana,  Iowa,  Maine, 
Minnesota,  Oklahoma,  and  Vermont — 6. 

The  "Mobile  Bill"  was  in  force  by  department  rulings  in  Mississippi  and  South 
Carolina — 2. 

There  is  no  provision  for  valuation  in  the  "N.  F.  C.  Uniform  Bill,"  but  there  is 
a  provision  which  enables  the  Commissioner  to  call  for  "such  further  information  as 
he  deems  necessary  to  a  proper  exhibit  of  its  business  and  plan  of  working,"  and  in 
the  exercise  of  this  authorized  discretion  it  is  understood  that  the  Commissioners 


73 

of  the  six  States  where  that  bill  is  the  law  will  demand  a  valuation  report.  There- 
fore, beginning  with  1914,  the  fraternal  societies  doing  business  in  the  thirty-three 
above  named  States,  must  report  valuation  results  as  of  December  31,  1913,  and 
annually  thereafter,  and  the  results  must  be  made  known  to  the  membership. 

On  good  authority,  it  is  stated  that  all  commissioners  belonging  to  the  National 
Convention  of  Insurance  Commissioners  (which  will  probably  include  the  commis- 
sioners of  all  of  the  States)  will  use  the  Uniform  Fraternal  Blank  for  annual  re- 
ports, which  will  require  valuation  returns.  Hence  it  appears  that  there  will  be 
a  general  demand  in  1914  for  the  valuation  of  all  fraternal  beneficiary  societies  now 
doing  business  in  the  United  States,  since  all  commissioners  have  the  discretionary 
power  to  call  for  "further  information." 

The  States  not  above  enumerated  have  general  laws  or  exemption  laws  in  respect 
of  fraternal  societies,  and  it  is  anticipated  that  all,  or  at  least  the  most,  of  the  States 
will  soon  have  on  their  statute  books  a  uniform  bill  known  as  the  New  York  Con- 
ference Bill. 

There  have  been  no  material  changes  in  the  laws  of  the  Dominion  or  the  Provinces 
of  Canada,  but  the  Government  at  Otawa  is  now  considering  the  advisability  of 
recommending  to  the  Parliament  the  passage  of  a  law  similar  to  that  of  the  New 
York  Conference  Bill,  or  at  least  which  will  provide  for  valuations  of  certificates. 
There  was  special  legislation  in  the  Province  of  Ontario  for  the  benefit  of  the  Inde- 
pendent Order  of  Foresters,  and  which  is  virtually  the  charter  of  that  organization. 
Under  that  charter  the  readjustment  of  the  old  class  of  members  who  entered  the 
society  prior  to  1898  was  made  and  has  created  considerable  friction  between  the 
Independent  Order  of  Foresters  and  some  Insurance  Departments,  especially  that 
of  Wisconsin.  It  appears  that  what  is  permissible  under  the  Act  of  Ontario  is  not 
allowed  in  the  State  of  Wisconsin.  At  least  that  is  the  representation  made  by  the 
Insurance  Commissioner  of  that  State.  At  this  writing  there  is  an  unfortunate  con- 
tention between  the  Insurance  Commissioner  of  Wisconsin  and  the  Independent 
Order  of  Foresters,  and  it  now  appears  that  several  other  commissioners  will  join 
with  the  Commissioner  of  Wisconsin  in  certain  demands  upon  the  Society,  which 
are  resisted  by  the  officials  of  that  organization.  Otherwise  than  this  difference  it 
would  appear  that  all  of  the  fraternal  beneficiary  societies  and  the  insurance  com- 
missioners are  agreed  upon  the  provisions  of  the  uniform  bill  as  hereinbefore  set  forth. 

Not  only  has  there  been  an  agreement  upon  the  provisions  for  State  legislation, 
but  there  was  a  consummation  of  fraternal  amity  by  the  consolidation  of  the  National 
Fraternal  Congress  and  the  Associated  Fraternities  into  one  organization  to  be  known 
as  the  National  Fraternal  Congress  of  America.  This  most  desirable  and  commend- 
able act  resulted  from  a  meeting  of  both  associations  during  the  same  week  in  the 
city  of  Chicago,  in  August,  1913.  There  still  remains  the  independent  organization 
known  as  the  Federated  Fraternities.  Though  requests  have  been  made,  I  have  not 
been  furnished  with  the  proceedings  of  that  organization,  and  unfortunately  my 
engagements  have  been  such  that  I  have  been  unable  to  attend  the  meetings  either 
in  1913  or  in  previous  years.  For  sixteen  years  I  have  attended  the  annual  sessions 
of  the  National  Fraternal  Congress  and  with  one  exception  have  also  attended  the 
annual  meetings  of  the  Associated  Fraternities  of  America.  I  have  had  closer  rela- 
tions with  the  National  Fraternal  Congress  and  have  been  honored  with  representa- 
tion on  its  Committee  on  Statutory  Legislation,  as  well  as  being  appointed  as  a 
special  representative  in  the  many  conferences  held  with  the  Insurance  Commissioners 
in  conjunction  with  the  representatives  of  the  Associated  Fraternities.  I  have  been 
cordially  received  into  the  meetings  of  both  of  these  National  Associations  during 


74 

the  ten  years  when  they  were  not  agreed  upon  public  policy.  I  have  read  many  papers 
before  both  organizations  and  have  tried  to  do  my  part,  not  only  in  securing  proper 
legislation  for  the  fraternal  systems,  but  in  establishing  rates  of  contribution  that 
would  provide  for  the  benefits  promised. 

I  have  quoted  liberally  from  the  proceedings  of  the  National  Fraternal  Congress 
up  to  1901,  but  have  passed  over  the  ten  years  when  there  was  contention  between 
the  fraternal  forces.  While  there  was  little  real  progress  towards  desirable  legisla- 
tion during  that  period,  nevertheless  there  were  many  things  accomplished  by  co- 
operation between  the  two  national  bodies  and  the  Convention  of  Insurance  Com- 
missioners and  probably  the  time  was  not  lost  considering  the  accomplishment  in  1910 
in  the  way  of  the  Mobile  Bill  and  in  1912  in  the  agreement  upon  the  New  York 
Conference  Bill,  which  latter  was  not  only  agreed  to  by  the  National  Fraternal  Con- 
gress and  the  Associated  Fraternities  of  America  and  the  National  Convention  of 
Insurance  Commissioners,  but  as  well  by  the  Federated  Fraternities. 

However,  the  part  played  by  the  Associated  Fraternities  was  that  of  the  leading 
character  during  the  eventful  decade,  1901-1911,  and  this  history  would  not  be  com- 
plete without  some  reference  to  its  policies  and  personnel. 

The  President  of  the  first  annual  meeting,  Mr.  C.  H.  Robinson,  was  a  man  of 
culture  who  had  made  an  enviable  reputation  as  a  lawyer  and  lawmaker  in  Iowa 
before  identifying  himself  with  the  Brotherhood  of  American  Yeomen. 

The  first  Secretary,  Mr.  Edmund  Jackson,  had  been  connected  with  active  fra- 
ternal work  until  he  was  generally  and  favorably  known  as  a  man  worthy  to  become 
a  leader  in  the  new  movement.  He  was  then  Secretary  of  the  Mystic  Workers  of 
the  World. 

There  were  few  Societies  amongst  those  represented  at  the  first  annual  meeting 
that  had  been  in  business  for  ten  years,  but  there  were  many  intelligent  and  earnest 
men  amongst  the  representatives.  The  following  names  will  be  recognized  as  those 
of  faithful  and  successful  officials  of  well-known  Fraternal  Beneficiary  Societies : 
G.  H.  Slocum,  John  J.  Coyle,  C.  B.  Paul,  George  R.  McKay,  J.  E.  Williams,  James 
M.  Godell,  B.  W.  Blanchard  (editor  and  writer  and  chicken  fancier),  A.  L.  Craig, 
Frederick  Gaston,  J.  L.  Rose,  G.  J.  Eblen,  Orman  Kennedy,  J.  H.  Burtner,  E.  E. 
Burson,  J.  F.  Taake,  T.  B.  Hanley,  E.  L.  Balz,  Lee  W.  Squier,  C.  B.  Gardner,  W.  R. 
Eidson,  George  A.  Scott,  J.  C.  Desaulmiers,  and  Henri  Roy.  At  the  succeeding  meet- 
ing there  came  into  prominence  William  Koch,  W.  E.  Davy,  Robert  Rexdale,  Miss 
Annie  O'Connor,  J.  S.  Dailey,  Chas.  F.  Hatfield,  M.  L.  Campbell,  H.  E.  V.  Porter, 
G.  L.  Peterson,  J.  L.  Mitchell,  N.  J.  Hein,  J.  F.  Sherer,  E.  W.  Donovan,  Hugh  R. 
Moffit,  and  C.  E.  Corlett 

Each  meeting  was  an  interesting  one.  Valuable  papers  and  intelligent  discussion 
never  failed  to  make  the  annual  Conventions  notable.  From  the  beginning  valuation 
and  adequate  rates  were  popular  topics.  There  was  opposition  to  what  was  charac- 
terized as  the  "Force  Bill"  of  the  National  Fraternal  Congress,  but  there  was  no 
opposition  to  the  proper  provision  for  benefits  promised. 

The  Associated  Fraternities  adopted  a  "Uniform  Bill"  and  urged  it  vigorously 
as  a  substitute  for  that  advocated  by  the  National  Fraternal  Congress. 

The  Insurance  Commissioners  generally  stood  with  the  Congress  and  the  Congress 
Bill  was  enacted  into  law  in  several  States  during  the  decade  1901-1910. 

On  the  whole,  little  progress  was  made  in  securing  desirable  legislation  during 
the  ten  years  because  of  the  disagreement  between  these  two  National  Fraternal  Organ- 
izations. 


75 

Each  year  there  were  conferences  between  the  representatives  of  the  National 
Fraternal  Congress,  the  Associated  Fraternities  and  the  Convention  of  Insurance 
Commissioners,  and  sometimes  there  was  a  tentative  truce  and  sometimes  there  were 
discouraging  dissensions. 

The  Commissioners  would  become  impatient  and  undertake  to  draft  their  own 
Uniform  Bill,  and  once  (at  Baltimore,  in  1903)  framed  a  bill  which  made  the  Actuaries' 
Combined  Experience  Table  of  Mortality  the  standard  for  "minimum."  rates. 

There  arose  such  differences  over  the  question  of  rate  legislation  that  several  so- 
cieties withdrew  from  the  National  Fraternal  Congress  and  became  identified  with 
Associated  Fraternities  of  America.  Amongst  them  were  the  Woodmen  of  the  World 
and  the  Modern  Woodmen  of  America,  two  of  the  largest  Societies  in  America. 

I  witnessed  division  amongst  my  friends  and  clients,  and,  though  to  my  disadvan- 
tage in  a  business  way,  my  convictions  forced  personal  participation  in  the  debates 
as  well  as  in  the  conferences,  and  thereby  at  least  I  had  the  advantage  of  first-hand 
knowledge  of  all  circumstances  and  conditions  affecting  and  incident  to  the  Fraternal 
System  during  this  turbulent  period. 

My  purpose  from  the  beginning  of  my  activity  was  to  benefit  the  cause,  and  in 
carrying  out  this  purpose  I  have  often  done  and  said  things  which  resulted  in  the  loss 
of  patronage  of  Societies  whose  officials  were  close  and  esteemed  friends.  I  men- 
tion this  fact  to  indicate  the  spirit  of  the  times  in  that  a  man  should  become  thus 
involved  who  never  had  any  official  connection  with  any  Society  and  whose  pro- 
fessional interest  would  have  been  conserved  best  by  maintaining  pleasant  business 
relations  with  all  factions. 

While  not  always  in  complete  accord  with  the  majority  in  the  National  Fraternal 
Congress,  yet  I  conscientiously  believed  that  it  could  accomplish  greatest  good  for  the 
Fraternal  System  and  therefore  I  supported  its  policies.  Notwithstanding  this  atti- 
tude, the  Associated  Fraternities  of  America  always  welcomed  me  to  their  meetings 
and,  by  invitation,  I  furnished  papers  for  their  proceedings  and  took  part  in  their 
deliberations,  and  served  many  of  the  constituent  Societies  as  an  Actuary.  This  is 
recorded  as  an  expression  of  appreciation. 

From  "Statistics  Fraternal  Societies,"  published  by  the  Fraternal  Monitor,  and 
giving  returns  to  January  i,  1913,  I  extract  the  following  concerning  Fraternal  Ben- 
eficiary Societies : 

Number   of   Beneficial    Members    7,451,735 

Number  of  Social   Members    420,848 

Total  Number  of  Members  7,872,583 

Total  Number  of  Lodges 1 16,732 

Protection  in  force  January  i,  1913 $9,128,191,000 

Benefit  paid  in  1912 95,341,585 

Total   Assets : 191,278,819 

Total   Liabilities    21,408,506 

Total  Income  in  1912 128,156,023 

Total  Disbursements  in  1912   109,370,581 

Members  Introduced  in  1912 963,494 

Protection  written  in  1912   $974.795,50° 

Following  is  a  list  of  the  Societies  doing  business  in  1912,  and  the  years  in  which 
they  were  organized : 

Date  organized. 

Order  Brith  Abraham  (U.  S.  Grand  Lodge) 1859 

L'Union  St.  Joseph  du  Canada   1863 


76 

Catholic  Family  Protective  Association 1868 

United  Workmen,  Ancient  Order  of 1868 

*Masonic  Mutual  Life  Association 1869 

Independent  Order  Free  Sons  of  Israel 1871 

United  Workmen,  Ancient  Order  of  (New  York)   1873 

Artisans'  Order  of  Mutual  Protection 1873 

Knights  of  Honor    1873 

.  Brotherhood  of  Local  Firement  and  Enginemen 1873 

*Odd  Fellows  Relief  Association  of  Canada. 1874 

"•"Independent  Order  of  Foresters   1874 

United  Workmen,  Ancient  Order  of  (Illinois)    1875 

*United  Order  of  Golden  Cross   •  • 1876 

^Catholic  Mutual  Benefit  Association   1876 

*United  Workmen,  Ancient  Order  of  (Minnesota)   1877 

*Catholic  Knights  of  America 1877 

*Royal  Arcanum 1877 

*Societe  des  Artisans  Canadiens-Francais,  La 1877 

Knights  and  Ladies  of  Honor  1877 

"•Knights  of  Pythias  (Insurance  Department) 1877 

^Western   Catholic  Union 1877 

^Improved  Order  of  Heptasophs 1878 

-Order  of  Mutual  Protection   1878 

Order  of  Scottish  Clans 1878 

*United  Workmen,  Ancient  Order  of  (Washington)   1879 

United  Workmen,  Ancient  Order  of  (Kansas)   1879 

^United  Workmen,  Ancient  Order  of  (Ontario) 1879 

United  Workmen,  Ancient  Order  of  (Massachusetts)    1879 

*United  Order  of  the  Pilgrim  Fathers  •  • 1879 

Iowa  Legion  of  Honor  ' 1879 

-Legion  of  Honor  of  Missouri ; 1879 

*Roman  Catholic  Mutual  Protective  Society   * 1879 

Mutual  Aid  Society  of  the  German  Lutheran  Synod 1879 

Massachusetts  Catholic  Order  of  Foresters   •  • 1879 

Canadian  Order  of  Foresters  1879 

"T)rder  of  Sparta 1880 

*Catholic  Mutual  Benefit  Association  of  Canada  1880 

*Polish  National  Alliance 1880 

*National  Union 1881 

*Knights  of  the  Modern  Maccabees • 1881 

Knights  of  Father  Mathew  1881 

Catholic  Benevolent  Legion 1881 

*German  Roman  Catholic  Knights  of  St.  George  1881 

515 Knights  of  Columbus 1882 

German  Baptists'  Life  Association   . 1883 

*  Modern  Woodmen  of  America • 1883 

*Knights  of  St.  John  and  Malta 1883 

*Catholic  Order  of  Foresters 1883 

"'Knights  of  the  Maccabees  of  the  World  1883 

*Legion  of  the  Red  Cross ,....  1883 

Brotherhood  of  Railroad  Trainmen   1883 

*Royal    League 1883 

*Royal  Templars  of  Temperance  (Canada)   1884 

Order  of  Canadian  Home  Circles  1884 

*Workmen's  Sick  and  Death  Benefit  Fund  of  the  U.  S.  A 1884 

Fraternal  Mystic  Circle  1885 

Catholic  Knights  of  Wisconsin   1885 

Christian  Burden  Bearers'  Association   1885 

*Shield  of  Honor 1885 

Order  of  Canadian  Home  Circle  1885 

Grand  Fraternity,  The   •  • 1886 

*Ladies  of  the  Modern  Maccabees  1886 


77 

^Empire  State  Degree  of  Honor •  • 1886 

United  Workmen,  Ancient  Order  of  (Nebraska)    1886 

*Protected  Home  Circle  •  • 1886 

*Degree  of  Honor,  A.  O.  U.  W.  of  Kansas  1887 

Independent  Order  of  B'rith  Abraham 1887 

Canadian  Order  of  Chosen  Friends   1887 

*New  England  Order  of  Protection 1887 

United,  Commercial  Travelers,  Order  of 1888 

*United  Workmen,  Ancient  Order  of  (South  Dakota) 1889 

*Loyal  Association    1889 

Indeepndent  Order  Free  Sons  of  Judah 1890 

National  Slavonic  Society  of  U.  S.  A 1890 

*Ladies'  Catholic  Benevolent  Association   . . 1890 

Catholic  Knights  and  Ladies  of  America  1890 

*Woodmen  of  the  World   (Pacific  Jurisdiction) 1890 

Brotherhood  of  America    1890 

^Fraternal  Aid  Association  •  • 1890 

.^JSTational  Protective  Legion   1890 

*Woodmen  of  the  World  (Sovereign  Camp) 1891 

Order  of  the  Amaranth 1891 

United  Aid 1891 

^Women's  Catholic  Order  of  Foresters  1891 

*U.  S.  Letter  Carriers'  Mutual  Benefit  Association 1891 

Catholic  Knights  of  Ohio 1891 

United  Workmen  Ancient  Order  of  (New  Jersey)   1892 

^Knights  and  Ladies  of  Security 1892 

United  Workmen,  Ancient  Order  of  (Oklahoma)    1892 

^German  Beneficial  Union   1892 

Bohemian  Salvonian  Union  . . 1892 

*Ladies  of  the  Maccabees  of  the  World  1892 

Union   Fraternal  League    • « 1893 

American   Benefit   Society 1893 

Catholic  Relief  and  Beneficiary  Association 1893 

Loyal  Mystic  Legion  of  America 1893 

Independent  Scandinavian  Workingmen's  Association    1893 

^United  Order  of  Foresters 1893 

'•Alliance   Nationale 1893 

Workmen's    Benefit   Association 1893 

Woodmen  of  the  World  (Canadian  Order)    1893 

United  Workmen,  Ancient  Order  of  (Iowa) 1893 

*Ben-Hur,    Supreme  Tribe 1894 

American  Insurance  Union   •  • !894 

*Ancient  Order  of  Gleaners   1894 

'"United    Artisans • 1894 

*National  Benevolent  Society  1894 

Continental  Beneficial  Association 1894 

United  Workmen,  Ancient  Order  of  (West  Virginia) 1895 

-""Loyal   Guard,  The    •  • 1895 

"Life  and  Annuity  Association  1895 

Royal  Neighbors  of  America 1895 

North  American  Union  1895 

United  Workmen,  Ancient  Order  of  (N.  Dakota)   1895 

*Court  of  Honor    • 1895 

vOrder  of  Columbian  Knights   1895 

^Catholic  Women's  Benevolent  Legion   1895 

vWoodmen  Circle 1895 

United  Benevolent  Association  1895 

*Fraternal  Brotherhood 1896 

*Mystic  Workers  of  the  World  1896 

Order  Knights  of  Joseph 1896 

*Degree  of  Honor,  Superior  Lodge  1896 


78 

*Royal   Highlanders    .  . 1896 

*Fraternal  Union  of  America    1896 

Eastern  Star  Benevolent  Fund  of  America  .  . .  •  • 1896 

Catholic  Ladies  of  Columbia . 1896 

Occidental  Mutual  Benefit  Association 1896 

*Loyal  Americans  of  the  Republic  1896 

^Association    Canado-Americaine    •  • 1896 

*Sons  and  Daughters  of  Justice 1897 

*Modern  American  Fraternal  Order 1897 

*Brotherhood  of  American  Yeomen   1897 

*Women  of  Woodcraft 1897 

^Modern  Brotherhood  of  America  1897 

*Mutual  Protection  League   1897 

Modern   Samaritans    •  • 1897 

Western  Bohemian  Fraternal  Association   1897 

*Equitable  Fraternal  Union 1897 

Patricians,   The    1897 

*New  Era  Association 1897 

Royal   Benefit  Society    ^1897 

Order  of  the  Iroquois 1898 

*Yeomen  of  America   1898 

United  Workmen,  Ancient  Order  of  (Arkansas) 1898 

•"Modern  Order  of  Pratetorians 1899 

*Home  Guards  of  America  •  • !899 

Fraternal  Reserve  Life  Association   1899 

*Mystic  Toilers    •  • 1899 

North  Star  Benefit  Association   1899 

Daughters   of   Columbia   1899 

United  American  Mechanics,  Jr.  Order  (Ben.  Deg.)    1899 

Order  of  the  White  Cross  1900 

Catholic  Benevolent  League  of  Indiana •  • 1900 

United  Order  of  the  Golden  Star 1900 

Fraternal  Benefit  League   1900 

Workmen's    Circle 1900 

L'Union  St.  Jean-Batiste  d'Amerique • 1900 

*Fraternal  Bankers'  Reserve  Society 1901 

"Heralds  of  Liberty  - 1901 

Gold  Reserve  Life  Association 1901 

American   Woodmen    1901 

*Vesta   Circle    1901 

United  Amer.  Mechanics,  Jr.  Order  (Funeral  Ben.  Dept.)   1901 

United  Workmen,  Ancient  Order  of  (Conn.)    1901 

Beavers  Reserve  Fund  Fraternity  1902 

Order  of  the  Golden  Seal  •  • 1902 

"'National  Americans    : 1902 

^National  Fraternal  League 1902 

^Fraternal  Reserve  Association   1902 

*Aid  Association  for  Lutherans 1902 

*Independent  Order  of  Puritans 1903 

Lone  Star  Insurance  Union 1903 

American  Stars  of  Equity  1903 

^Columbian   Woodmen    •  • 1903 

Lincoln   Annuity  Union 1903 

Modern  Romans 1904 

Kinsmans  Mystic  Senate   1904 

^Farmers'  Life  Insurance  Association 1905 

Knights  of  Industry   1906 

Independent  Workmen's  Circle 1906 

""Homesteaders,   The    1906 

National  Home  Guard   « • 1906 


79 

Daughters  of  America  1907 

Order  of  Aztecs    •  • 1907 

National  Fraternal  Society  of  the  Deaf 1907 

Union   Fraternal   Association    •  • 1908 

Home  Watchmen  of  the  World  •  • 1908 

*Benevolent  Knights  of  America 1008 

Texas  Commercial  Union    •  • 1908 

*American  Workmen 1909 

^Southern   Benevolent  League    1909 

Columbian   Fraternal   Association    1910 

*Our  United  Brotherhood   -  - 191 T 

*Cycle  of  Equity   1911 

Southern  Woodmen    .                                        . .  •  • J9i x 


*Societies  that  have  employed  Mr.  Landis.  The  following1  have  also  engaged  his 
services  as  an  actuary,  though  their  names  do  not  appear  in  the  Monitor  list,  making 
a  total  of  143  that  he  has  served  in  a  professional  capacity. 

*The  Sailors. 

^Colorado  Grand  Lodge  Degree  of  Honor. 

^International  Liberty  Union. 

^Independent  Order  Shield  of  Honor. 

*St.  Lawrence  Life. 

^Common    Brotherhood  of   America. 

*Young  Men's  Mutual  Life  Association. 

*U.  S.  Civil  Service  Retirement  Association. 

*American   Union. 

*International  Ladies'  Garment  Workers'  Union. 

independent  Western  Star  Order. 

*Guild   of   the   East. 

^National    Protective    Association. 

*Catholic  Knights  of  Illinois. 

*Loyal    Protective   Ins.    Co. 

*United   Order    Hotel    Workmen. 

*Knights  of  Agriculture. 

^United  National  Association  of  P.  O.  Clerks. 

^Southern  Ins.  Union. 

*U.  S.  Postoffice  Clerks'  Mutual  Benefit  Association. 

*Birds  of  Freedom. 

"•Methodist  Ministers'  Relief  Association. 

*Modern  Protective  Association. 

'"•Fraternal  Relief  Association. 

^National  Annuity. 

*National  Mutual  Relief  Association. 

*Masons'  Annuity. 

*The   Pathfinders. 

'"American  Guild. 

*Keystone  Guard. 

*Mason's  Mutual  Aid  Association. 

*National  Creation  Society. 

*Mutual  Aid  Society  of  Lutherans. 

*A.  O.  U.  W.  Grand  Jurisdiction  of  Tenn. 

*Army  Aid  Association. 

*Stork  Fraternal   Society. 

*  Washington  League  of  Knights  and  Ladies. 

^Highland  Nobles. 

*Railway  Postal  Clerks'  Association. 

*Western   Commercial   Travelers'  Association. 

*The  Americans. 

*Modern  Knights  of  the  American  Home. 

*Methodist  Benevolent  Association. 

*Lmcoln  Fraternal  Union. 


80 

LIFE  INSURANCE  COMPANIES. 

Running  through  the  entire  history  of  the  development  and  supervision  of  Fra- 
ternal Beneficiary  Societies  there  is  prominent  the  sentiment  amongst  fraternal 
officials  that  the  regular  life  companies — "the  Old  Line  Companies" — are  continually 
lying  in  wait  for  the  destruction  of  the  Fraternal  System. 

The  fraternal  speakers  and  writers  of  papers,  as  seen  from  many  previous  quota- 
tions, characterize  the  life  companies  as  "our  common  enemy,"  as  "our  natural 
enemy,"  as  "our  insidious  foe,"  as  "the  instigator  of  ruinous  legislation,"  as  "a  secret 
enemy  always  to  be  watched." 

Even  the  judicial  mind  of  Chairman  Butler  was  influenced  by  the  prevailing  senti- 
ment and  uttered  warnings  against  the  life  companies  as  the  ever-present  and  con- 
trolling power  over  commissioners  and  legislators  to  the  injury  of  fraternal  orders, 
notwithstanding  his  candid  admission  that  he  had  no  evidence  to  support  his  suspicions. 

For  twenty-five  years  I  have  given  exclusive  attention  to  the  interests  of  Fraternal 
Beneficiary  Societies,  but  I  have  not  neglected  the  opportunity  to  cultivate  the 
acquaintance  and  seek  the  friendship  of  the  actuaries  of  the  life  companies,  and  I 
have  met  and  known  many  of  the  executive  officers  of  those  companies.  Like  Chair- 
man Butler,  of  the  Committee  on  Legislation,  I  have  never  been  able  to  find  any 
evidence  that  the  life  companies  desired  or  connived  at  the  ruin  of  Fraternal  Bene- 
ficiary Societies ;  unlike  Brother  Butler,  I  have  never  suspected  something  unsup- 
ported by  evidence. 

The  facts  are  that  the  executive  officers  of  life  companies  have  given  very  little 
thought  to  the  Fraternal  Beneficiary  Societies.  They  know  in  a  general  way  of  the 
existence  of  fraternal  orders,  but  the  fraternal  people  would  be  surprised  to  learn 
how  little  they  really  know  of  the  work  of  these  great  provident  institutions,  and 
what  little  consideration  they  have  given  to  them. 

The  idea  of  antagonism  has  arisen  from  the  action  of  field  men  and  the  insurance 
press  which  has  followed  agency  criticism. 

Those  who  live  by  commissions  on  business  written  necessarily  must  get  business 
to  live,  and  they  have  taken  advantage  of  the  defects  and  weaknesses  of  the  fraternals 
to  criticise  them  and  divert  business  from  them.  It  is  the  exception  when  the 
management  of  a  life  company  has  supported  or  encouraged  the  attacks  made  by 
agents,  or  the  criticism  indulged  by  the  insurance  papers. 

But  in  respect  of  the  action  and  attitude  of  the  agents  and  insurance  papers 
have  they  in  fact  misrepresented  the  Fraternal  Societies?  Have  not  the  Societies 
given  cause  for  criticism  and  laid  themselves  liable  to  attack? 

Instead  of  pleading  the  baby-act,  would  it  not  have  been  better  to  have  removed 
the  cause  of  criticism  and  manfully  met  competition  on  a  business  basis? 

Would  it  not  have  been  better  for  the  Societies  that  all  of  us,  who  have  at  heart 
their  real  interests,  should  have  long  ago  acknowledged  defects  and  sought  their 
remedy  rather  than  to  complain  of  criticism  and  yet  continue  wrong  methods? 

Should  we  not,  years  ago,  have  acknowledged  that  the  Societies  were  doing  a  life 
insurance  business,  instead  of  straining  after  distinguishing  differences  that  would 
not  stand  the  test  of  common  sense  analysis? 

Should  we  not,  years  ago,  have  recognized  the  common  sense  principle  that  busi- 
ness methods  alone  will  assure  the  success  of  a  business  enterprise,  and  have  gone 
about  this  business  of  life  insurance  in  a  business-like  way,  and  have  prepared  our 
organizations  for  any  legitimate  business  competition,  as  well  as  have  prepared  our 
organizations  for  the  performance  of  their  promises? 


81 

In  the  eventful  year  of  1901  I  urged  upon  the  attention  of  the  National  Fraternal 
Congress  the  necessity  for  valuation — for  taking  an  account  of  assets  and  liabilities — 
but  my  urgency  was  of  no  avail.  The  fraternal  managers  waited  until  conditions 
forced  the  agreement,  at  Mobile  in  1910,  concerning  valuation. 

Four  years  after  1901  I  made  an  effort  to  secure  action  looking  to  legislation 
that  would  permit  Juvenile  Insurance,  and  the  Committee  on  Statistics  and  Good  of 
the  Orders  prepared  a  report  from  facts  given  by  me,  urging  this  matter  upon 
the  attention  of  the  Congress;  but  fraternal  managers  passed  it  by,  until  now  condi- 
tions make  the  need  of  it  felt. 

And  now  comes  up  the  matter  of  "Group  Insurance,"  and  instead  of  recognizing 
its  good  features  and  securing  legislation  that  will  prevent  Fraternal  Beneficiary 
Societies  from  entering  upon  that  method  of  granting  protection,  we  hear  nothing 
but  criticism,  and  the  old,  old  cry  that  it  is  a  scheme  of  the  "Old  Line  Companies" 
to  ruin  the  Fraternal  Socieies. 

My  faith  in  the  Fraternal  System  is  so  strong  that  I  believe  Fraternal  Beneficiary 
Societies  can  adopt  contribution  rates  as  high  as  the  highest  premium  rates  of  any 
life  company  and  can  do  business  under  them ;  that  they  can  bring  their  financial 
position  to  the  valuation  standard  required  of  life  companies;  that  they  can  make 
a  greater  success  with  child  insurance  and  group  insurance  than  can  the  life  companies. 

My  faith  in  the  Fraternal  System  is  so  strong  that  I  believe  that  they  can  do 
without  legislative  favors  and  exemptions  on  the  assumption  and  under  the  pretense 
of  being  "charitable  and  benevolent  institutions"  (see  N.  Y.  Conference  and  other 
Uniform  Bills)  in  respect  of  their  funds  and  their  insurance  business. 

Why  this  faith? 

Because  mutual  cooperation  is  of  the  very  essence  of  insurance  protection  and 
the  most  complete  and  effective  cooperation  is  possible  through  the  means  at  the 
command  of  the  Fraternal  Beneficiary  Societies. 

The  life  company  organization  is  entirely  void  of  the  inherent  power  and  cohesive 
character  of  the  fraternal  society. 

Having  had  to  do  with  the  attempt  at  reconstructing  the  financial  methods  of  more 
than  one  hundred  of  these  societies,  I  am  in  position  to  speak  advisedly  of  the 
advantages  (and  sometimes  disadvantages)  of  local  lodges,  ritualistic  forms  and  rep- 
resentative government. 

My  faith  is  based  upon  facts  as  I  have  dug  them  out  of  the  experiences  of  these 
societies  through  personal  investigation,  and  as  I  have  obtained  them  from  the  in 
vestigations  of  others. 

From  my  viewpoint,  there  is  no  doubt  of  the  superior  strength  and  efficiency  given 
to  cooperation  through  sound  and  safe  business  methods  being  combined  with  the 
fraternal,  social  and  charitable  features  of  the  provident  societies. 

The  adoption  of  "Group  Insurance"  by  purely  business  corporations  is  convincing 
evidence  of  the  appreciation  by  shrewd  business  men  of  the  desirability  of  com- 
munity cooperation. 

Why  managers  and  members  of  Fraternal  Beneficiary  Societies  neglect  the  full 
advantage  of  such  a  combination  of  business  and  fraternity  as  is  within  their  grasp 
will  remain  one  of  the  mysteries  of  development  and  progress  through  human  agencies. 

It  is  not  altogether  clear  in  my  own  mind  that  I  should  have  written  this  preface 
to  the  chapter  of  comments  on  Life  Insurance  Companies.  Pertinent  or  not,  I  will 
let  it  stand. 


82 

HISTORICAL. 

A  detailed  history  is  not  intended ;  only  brief  references  to  the  past  shall  'be  made 
in  order  to  give  the  reader  some  idea  of  the  -period  covered  by  the  business  of  insur- 
ance in  general  and  of  life  insurance  in  particular,  and  to  establish  the  fact  that 
the  business  itself  is  very  simple  and  had  its  origin,  not  among  the  learned  nor  the 
"Napoleons  of  Finance,"  but  among  the  common,  working  people.  The  conception 
of  life  insurance  was  not  in  the  brain  of  any  great  philosopher,  but  came  to  the 
mind  of  the  meek  and  lowly  from  promptings  of  brotherly  love.  It  was  not  a  product 
of  the  head,  but  of  the  heart. 

Like  religion  and  charity,  insurance  has  been  much  abused,  largely  misused  and 
greatly  diverted  from  its  original  purpose  of  benefiting  the  masses  through  mutual 
cooperation. 

The  proper  application  of  the  principle  of  cooperation  to  life  insurance  has  never 
been  thoroughly  understood  by  all  who  have  appreciated  the  great  power  of  the 
principle  itself.  This  ignorance  has  been  the  cause  of  many  failures  of  well-inten- 
tioned projects,  as  well  as  the  cloak  for  hundreds  of  fraudulent  schemes  and  specula- 
tive and  disastrous  ventures. 

Through  cooperation  large  sums  can  be  accumulated  by  small  contributions  from 
each  of  a  great  many  subscribers.  If,  by  any  means,  a  few  persons  can  induce  many 
other  persons  to  favor  them  with  such  contributions,  it  is  possible  for  each  of  the 
few  to  become  enriched  without  any  great  burden  upon  or  sacrifice  from  the  many. 

Again,  if  many  persons  will  each  make  a  small  contribution  to  a  general  fund, 
and  have  such  fund  judiciously  invested  and  managed,  it  is  possible  to  so  improve 
it  as  to  give  larger  returns  to  each  subscriber  than  he  could  have  realized  from 
earnings  on  the  amount  of  his  original  contribution  when  separately  invested. 

Just  as  it  is  possible  for  a  number  of  men  uni'ted  to  do  what  one  cannot  per- 
form, so,  within  limits,  the  aggregate  use  of  many  dollars  will  enable  persons  to  take 
advantage  of  opportunities  for  investment  and  profit  which  are  entirely  beyond  those 
who  have  only  one  dollar. 

Recognition  of  the  last  proposition  brought  about  Savings  Banks,  Building  and 
Loan  Associations  and  similar  provident  institutions. 

Recognition  of  the  first  proposition  has  been  responsible  for  some  of  the  best  and 
some  of  the  worst  cooperative  organizations  conceivable. 

Where  the  suffering  few  have  been  relieved  by  the  benevolent  many  immeasurable 
good  has  resulted. 

Where  the  greedy  and  selfish  few  have  profited  by  the  pennies,  nickles  and  dimes 
squeezed  from  the  hard  earnings  of  the  impoverished  many  the  most  damnable  of 
outrages  have  been  perpetrated. 

Life  insurance  has  'been  established  upon  that  principle  of  cooperation  where  the 
many  contribute  for  the  benefit  of  the  few  and  whether  or  not  the  business  of  life 
insurance  is  of  public  utility  or  detriment  depends  upon  the  character  of  the  few 
who  profit  from  the  contributions  of  the  many. 

When  the  few  are  widows  and  orphans  saved  from  penury  and  want,  then  un- 
qualified good  comes  from  the  contributions  of  the  many. 

The  science  of  probabilities  furnishes  the  basis  for  computations  that  render  the 
business  of  life  insurance  safe  and  successful,  and  it  requires  very  little  alteration 
in  mathematical  formulas  to  make  them  apply  as  well  to  gambling  and  speculative 
contracts  as  to  the  chance  of  paying  a  death  claim  under  an  agreement  that  would 
alone  benefit  women  and  children. 


83 

When  the  science  of  chances  and  probabilities  is  employed  to  work  out  a  scheme 
of  mutual  cooperation  where  indemnity  for  loss  of  support  through  the  death  or 
disability  of  the  wage-earner  is  the  prime  object  to  be  attained,  then  the  result  of 
operation  makes  it  possible  for  men  of  limited  means  to  assure  protection  to  their 
families  against  want  and  deprivation,  though  life  or  health  fail  before  other  pro- 
vision has  been  made  for  them. 

When  the  same  science  is  employed  in  the  formulation  of  plans  where  the  chances 
to  benefit  are  in  favor  of  the  wealthy  who  are  able  to  persist  to  the  end  of  a  tontine 
or  accumulation  period  when  a  distribution  of  forfeited  payments  is  made,  then 
the  result  of  operation  degenerates  into  a  gamble  and  demoralizing  speculation. 

I  wish  that  space  were  alloted  and  the  patience  of  close  reading  assured  for  a  com- 
prehensive presentation  of  the  effects  of  cooperative  effort  during  the  last  two  hun- 
dred years. 

The  scope  of  the  present-day  insurance  is  broad  and  comprehensive,  but  we  are 
not  yet  returned  to  the  point  of  reckless  risk  which  characterized  the  business  in 
England  just  prior  to  the  "Bubble  Act"  of  1/19.  Cornelius  Walford  thus  describes  that 
extravagant  era  of  taking  chances. 

We  should  simply  subject  ourselves  to  the  charge  of  romancing  if  we  were,  thus 
early,  to  rend  aside  the  veil  of  a  century,  and  assert  the  existence  of  companies  for 
Insuring  against  Housebreakers  and  Highwaymen — against  lying,  or  death  by  drink- 
ing Geneva!  Yet  the  climax  of  that  period  (the  era  of  the  South  Sea  Bubble)  was 
only  reached  by  a  scheme  in  "Change  Alley"  for  the  insurance  of  female  chastity, 
and  another  against  divorces! 

Walford  designates  the  period  from  1608  to  1760  as  the  era  of  "Speculative  Assur- 
ance." It  is  worth  while  to  give  an  idea  of  those  times  by  quoting  what  he  says  of 
them : 

That  which  strikes  the  historical  reader  as  one  of  the  most  remarkable  features 
of  the  times  is  the  purposes  for  which  many  of  the  so-called  Assurance  Offices  were 
got  up.  Here  we  find  "A  Mutual  Assurance  Company  was  formed  to  aid  an  adven- 
turer with  funds  to  raise  a  vessel  which,  laden  with  the  treasures  of  the  East,  had 
been  lost  on  her  passage  home;  the  peculiar  features  of  the  transaction  being  that 
if  any  of  the  association  should  die  before  the  object  was  accomplished,  their  share 
was  to  be  transferred  to  the  remaining  adventurers."  This  made  the  hazard  a  doubl- 
one.  Another  company,  having  at  its  head  three  English  peers,  two  bishops,  four 
Irish  peers,  with  many  eminent  merchants  and  gentlemen,  petitioned  the  king  that 
it  might  be  incorporated  for  purchasing  and  improving  forfeited  and  other  estates 
in  Great  Britain,  for  granting  annuities,  and  for  insuring  lives;  seeing  this  will  (were 
the  words  of  the  petition)  unite  by  interest  many  of  the  King's  subjects  against  the 
Pretender  and  his  adherents  forever. 

But  the  distinguishing  feature  of  the  age  was  the  "gambling"  tendency  of  nearly 
all  the  offices.  Under  the  title  of  "Insurance  Wagers,"  every  conceivable  description 
of  speculation  was  entered  into.  On  one  day  we  find  the  offices  wagering  £30 
against  £100  that  King  William  could  not  reduce  the  City  of  Namur  before  a  given 
date.  The  next,  on  the  period  of  favor  to  be  enjoyed  by  the  mistresses  of  some 
foreign  potentate.  And  the  third  day,  on  the  sex  of  the  Chevalier  D'Eton,  whether 
he  was  a  male,  as  he  pretended  to  be,  or  a  female,  as  he  was  reputed  to  be.  The 
duration  of  the  lives  of  persons  believed  to  be  on  their  death  bed  was  a  common 
hazard;  and  the  author  of  "Every  Man  His  Own  Brother"  was  not  far  wrong  when 
he  said  the  dissolution  of  persons,  who  saw  themselves  insured  in  the  public  papers 
at  90  per  cent,  was,  not  unlikely,  hastened  by  such  announcements. 


84 

The  "Gambling  Act,"  in  the  reign  of  George  III.,  put  an  end  to  such  preposterous 
undertakings. 

It  enacted  that  no  insurance  shall  'be  made  on  the  life  of  any  person,  or  on  any 
event  whatsoever,  where  the  person  on  whose  account  it  shall  be  made  shall  have 
no  interest,  or  by  way  of  gaming  or  wagering;  and  that  every  such  insurance  shall 
be  null  and  void.  It  further  provides  that  it  shall  not  be  lawful  to  make  any  policy 
on  the  life  of  any  person,  or  on  any  other  event,  without  inserting  therein,  for 
what  use,  or  on  whose  account  such  policy  is  so  made;  and  where  the  insured  has  an 
interest  in  such  life  or  event  no  greater  sum  shall  be  received  from  the  insurer  than 
the  amount  of  the  interest  of  the  insured  in  such  life  or  event. 

From  1760  to  1815  the  time  has  been  called  the  "Transition  Period"  of  life  in- 
surance. 

In  1762  the  Equitable  Society  was  organized  in  England  with  an  effort  at  scientific 
accuracy  and  for  the  purpose  of  protecting  dependants  from  the  loss  of  support  by 
the  death  of  the  breadwinner.  The  contracts  of  insurance  were  entirely  devoid  of  any 
investment,  speculative  or  gambling  features,  there  being  no  other  inducement  to  be- 
come a  member  than  the  offer  to  pay  a  stated  sum  to  named  beneficiaries  upon  the 
event  of  death.  Several  other  companies  and  societies  were  started  prior  to  1815, 
and  an  earnest  investigation  of  mortality  experiences  was  begun.  Many  friendly 
societies  were  organized,  and  altogether  this  period  was  marked  by  honest  endeavor 
to  place  life  insurance  upon  a  sound,  safe  and  conservative  basis  with  an  eye  single 
to  the  good  of  the  members.  The  character  of  the  business  is  reflected  in  the  petition 
for  a  charter  of  the  Equitable  Society  when  setting  forth  the  purpose  of  the  organi- 
zation as  follows: 

That  great  numbers  of  H.  M.'s  subjects  whose  subsistence  principally  depends  on 
the  salaries,  stipends,  and  other  incomes  payable  to  them  during  their  natural  lives, 
or  on  the  profits  arising  from  their  several  trades,  occupations,  labor  and  industry, 
are  very  desirous  of  entering  into  a  society  for  assuring  the  lives  of  each  other,  in 
order  to  extend,  after  their  decease,  the  benefit  of  their  present  incomes  to  their 
families  and  relations,  who  may  otherwise  be  reduced  to  extreme  poverty  and  dis- 
tress by  the  premature  death  of  their  several  husbands,  fathers  and  friends,  which 
humane  intention  the  petitioners  humbly  apprehend  cannot  be  effectually  carried 
into  execution  without  H.  M.'s  Royal  Authority  to  incorporate  them  for  that  purpose. 

Walford  designates  the  period  of  1816-1844  as  the  "Golden  Age  of  Assurance 
Companies  in  Great  Britain."  Contrasting  the  period  and  the  companies  with  those 
that  had  gone  before,  he  says : 

To  speak  of  this  as  the  Golden  Age  of  Assurance  Companies  may  seem  to  dis- 
parage those  societies  established  at  earlier  dates.  Our  intention  is  not  to  do  this. 
Indeed,  those  early  companies  which  are  still  existing  speak  for  themselves;  they 
have  all  attained  high  positions  despite  the  difficulties  they  had  to  encounter,  and 
the  doubt  which,  for  a  time,  surrounded  them.  Of  those  still  earliest  societies,  which 
have,  happily,  long  since  passed  away,  Dr.  Price  truly  said  that  to  call  them  imposi- 
tions on  the  public,  proceeding  from  ignorance,  and  supported  by  credulity  and  folly, 
was  "too  gentle  a  censure."  But  we  shall  be  fully  able  to  justify  our  position  by 
a  review  of  the  advantages  the  companies  of  this  period  possessed  over  those  which 
preceded  them. 

These  advantages  may  be  ranged  under  several  heads.  First,  and  chiefly,  the 
more  accurate  data  which  scientific  investigation  had  placed  at  their  disposal.  Next, 
the  rapid  improvement  which  had  been  made,  and  was  still  taking  place,  in  the  mor- 
tality of  the  kingdom.  Third,  the  legislative  encouragement  which  had  then  been 
newly  bestowed  upon  life  assurance.  And,  lastly,  as  rising  out  of  all  these,  the 
improved  public  feeling  which  had  set  in  in  favor  of  such  companies. 


85 

Although  two  or  three  British  companies  accepted  some  American  risks,  and  the 
Pennsylvania  Company  for  the  Insurance  of  Lives  and  Granting  of  Annuities  had 
commenced  business  in  1812,  yet  the  real  beginning  of  life  insurance  in  the  United 
States  dates  from  the  last  year  of  this  "Golden  Age"  in  Great  Britain,  when  the 
Mutual  Life  of  New  York  actively  entered  the  field.  By  1847  the  New  York  Life, 
New  England  Life,  the  Mutual  Benefit,  the  State  Life,  the  Connecticut  Mutual,  anc] 
Penn  Mutual  had  commenced  business,  and  it  may  be  said  that  life  insurance  opera- 
tion in  this  country  had  been  successfully  started. 

In  England  the  business  had  so  far  progressed  that  designing  persons  recognized 
the  opportunity  for  turning  it  to  selfish  ends,  and  scores  and  hundreds  of  companies 
were  set  afloat  and  the  undertakings  rivaled  those  of  the  previous  century.  Walford 
stamps  the  period  1844-1862  as  that  of  "Bubble  Companies."  He  writes : 

The  period  we  have  just  passed  over  did  much  to  popularize  the  practice  of  Life 
Assurance  in  this  country.  The  speculative  companies  of  a  former  period  had  passed 
out  of  memory.  The  principles  of  the  existing  offices  were  fast  becoming  consolidated ; 
and  the  companies  themselves  recognized  as  amongst  the  most  valued  monetary 
institutions  of  the  country.  The  magnitude  of  their  transactions  was  only  equalled 
or  surpassed  by  those  kindred  institutions,  banks :  and  the  promptitude  with  which 
they  met  their  engagements  deservedly  placed  them  high  in  public  confidence.  It 
was  not  to  be  supposed  that  such  a  state  of  things  could  long  continue  without  a 
"dark  side."  Those  who  know  most  of  human  nature  know,  and  deplore,  that  the 
best  of  institutions  are  the  most  liable  to  abuse.  This  has  been  proved  more  than 
once  in  the  history  of  Life  Insurance.  The  favorable  results  which  have  been 
achieved  by  sound  management  of  the  old  offices — more  particularly  the  bonuses 
of  the  equitable,  which  public  rumor  had  extended  even  beyond  their  almost  fabulous 
reality,  had,  coupled  with  a  want  of  popular  and  correct  knowledge  of  the  principles 
and  practice  of  Life  Assurance,  raised  public  expectation  to  a  high  pitch.  To  this 
circumstance,  combined  with  the  unlimited  confidence  before  referred  to,  must  we 
look  for  a  solution  of  that  blind  reliance  which  was  placed  in  many  of  the  swindling 
schemes  which  were  brought  forward  in  the  earlier  years  of  the  period  we  are 
entering  on,  and  in  the  numerous  abortive  projects  whose  concoctors,  after  exhausting 
the  large  funds  placed  at  their  disposal,  have  left  their  dupes  to  ascertain  the  extent 
of  their  remaining  liabilities  through  communications  made  to  them  by  the  officials 
of  the  Court  of  Chancery. 

In  "Martin  Chuzzlewit,"  Charles  Dickens  graphically  describes  the  offices  of  one 
of  the  "Bubble  Companies,"  and  gives  an  insight  into  the  methods  of  business  opera- 
tion and  the  designs  of  the  promoters. 

Considerable  space  has  been  devoted  to  the  early  history,  development  and  abuse 
of  life  insurance  in  Great  Britain,  because  American  companies  were  formed  upon 
the  English  model,  and  naturally  we  could  expect  a  repetition  of  the  history,  develop- 
ment and  abuse  of  the  business  in  this  country,  since  human  nature  is  virtually  the 
same  on  both  sides  of  the  Atlantic. 

It  might  be  interesting  and  instructive  to  follow  the  history  of  the  British  com- 
panies after  the  Act  of  1870,  and  it  would  be  a  lesson  for  American  policy-holders 
to  study  a  comparison  that  could  be  made  between  business  managements  of  English 
and  American  companies.  However,  attention  will  now  be  confined  to  conditions 
in  the  United  States,  which  directly  and  materially  concern  those  for  whom  I  am 
writing. 

Several  companies  did  a  life  insurance  business  in  a  limited  way  prior  to  1842, 
but  the  real  beginning  was  in  1843,  when  the  Mutual  Life  of  New  York  entered  the 
field  with  premium  rates  based  upon  the  recently  published  English  Table  of  Mor- 
tality, which  had  been  constructed  (in  1838)  from  the  combined  experience  of  seven- 
teen British  and  Scottish  life  offices.  Up  to  1861,  at  the  beginning  of  the  Civil  War, 


86 

twenty-seven  life  companies  had  been  formed  and  were  in  active  operation.  Several 
others  had  been  chartered,  and  some  of  them  were  doing  a  local  business,  but  the 
following  are  worthy  of  mention,  all  but  four  of  them  (marked  with  *)  being  now 
(1914)  in  operation.  Two  of  the  three,  the  New  York  Life  Insurance  &  Trust  Com- 
pany and  the  Pennsylvania  Company  for  Insurance  of  Lives  and  Granting  Annuities, 
never  did  a  large  life  insurance  business,  and  both  finally  discontinued  that  branch  and 
confined  themselves  to  transactions  as  trust  companies.  The  names,  dates  of  organi- 
zation and  location  of  the  twenty-seven  follow : 

Organized. 

i.     Presbyterian    Minister's    Fund,    Philadelphia 1759 

2.*  Penna.  Co.  for  Insur.  of  L.  &  Granting  An.,  Philadelphia •. .     1812 

3.*  N.  Y.  Life  Ins.  &  Trust  Co.,  New  York  City 1830 

4.  Mutual  Life  Insurance  Co.,  New  York  City  1842 

5.  New  York  Life  Ins.  Co.,  New  York  City  1843 

6.  New  England  Mutual  Life  Ins.  Co.,  Boston 1843 

7.  State  Mutual,  Worcester,   Mass 1844 

8.  Mutual  Ben.  Life  Ins.  Co.,  Newark,  N.  J 1845 

9.  Conn.  Mutual  Life  Ins.  Co.,  Hartford,  Conn 1845 

10.  Penn.  Mutual,  Philadelphia  • 1847 

11.  Union  Mut.  Life  Ins.  Co.,  Augusta,  Me 1848 

12.  National   Life    Ins.    Co.,    Montepelier,   Vt. 1848 

13.*  Charter  Oak  Life  Ins.  Co.,  Hartford,  Conn 1848 

14.  U.  S.  Life  Ins.  Co.,  New  York  City. 1850 

15.  Manhattan  Life   Ins.   Co.,  New  York  City 1850 

16.  Berkshire  Life  Ins.   Co.,  Pittsfield,  Mass 1850 

17.  Mass.  Mutual  Life  Ins.  Co.,  Springfield,  Mass 1851 

18.  Phoenix  Mutual  Life  Ins.  Co.,  Hartford,  Conn 1851 

19.  Aetna  Life  Insurance  Co.,  Hartford,  Conn 1851 

20.*  Knickerbocker  Life  Ins.  Co.,  New  York  City 1853 

21.  German  Mutual,  St.  Louis,  Mo 1857 

22.  Northwestern  Mutual,  Milwaukee,  Wis 1857 

23.  Equitable  Life  Assurance  Soc.  of  U.  S.,  New  York 1859 

24.*  Guardian  Mutual  Life  Insurance  Co.,  New  York 1859 

25.  Washington  Life  Insurance  Co.,  New  York 1860 

26.  Home  Life  Insurance  Co.,  New  York 1860 

27.  Germania  Life  Ins.   Co.,   New  York   1860 

The  years  between  1842  and  1861  constituted  the  "Formative  Period"  of  life 
insurance  in  the  United  States.  The  managers  learned  very  little  from  the  extended 
experience  of  companies  in  England,  and  there  was  much  ignorance  in  management  in 
respect  of  a  sufficient  accumulation  for  the  protection  of  contracts.  The  taking  of 
premium  notes  was  a  popular  feature.  Dividend  "credits,"  or  "certificates,"  was 
another  feature  that  was  condemned  by  experience.  To  indicate  the  crude  notions 
of  an,  adequate  reserve  the  following  is  taken  from  the  charter  of  the  Home  Life, 
as  published  in  the  1867  report  of  the  New  York  Insurance  Superintendent : 

The  net  profits  are  to  be  ascertained  annually  and  such  a  proiportion  thereof  as 
the  board  may  determine  shall  be  applied  towards  the  accumulation  of  a  reserve 
fund  of  $200,000,  and  the  remainder  shall  be  apportioned  to  participating  policy-holders. 

There  were  no  effective  laws  requiring  valuation,  and  those  companies  which 
voluntarily  made  a  valuation  used  six  and  seven  per  cent  interest  assumption.  How- 
ever, the  companies  were  honestly  and  conservatively  managed  and  remedies  were 
applied  as  defects  were  disclosed  by  experience  and  practical  operation. 

In  the  decade  1861-71  hundreds  of  new  companies  were  projected  and  started  and 
the  methods  of  the  "Speculative  Period"  in  England  held  sway. 


87 

The  Insurance  Superintendent  of  the  State  of  New  York,  George  W.  Miller,  in 
his  report  for  the  year  1871,  under  the  heading  of  "Retrospective,"  wrote : 

The  last  year  has  witnessed  the  continued  development  of  the  effects  of  the  two 
policies  which  have  prevailed  in  the  management  of  companies,  and  in  the  conduct 
of  the  Insurance  Department  of  this  State.  Prior  to  1870  the  business  of  life  insur- 
ance had  experienced  an  extraordinary  if  not  a  forced  and  unnatural  growth.  Many 
causes  conduced  to  this  result,  among  which  was  the  policy,  or  want  of  policy  in 
the  administration  of  this  department.  Every  facility  and  inducement  for  the  organi- 
zation of  new  companies  with  small  capital  was  held  out,  whilst  little,  if  anything, 
was  done  practically  to  prevent  the  inception  and  spread  of  practices  and  abuses 
whic'h  could  lead  to  but  one  result — insolvency.  From  this  inevitably  follows  dis- 
solution, disappointment  and  depression.  The  state  of  the  country,  the  inflation  of 
the  currency,  and  the  general  tendency  to  a  profligate  and  abnormal  conduct  of  all 
kinds  of  business,  required  the  exercise  of  extraordinary  intelligence  and  vigilance  in 
the  supervision  of  insurance,  which  unfortunately  was  not  to  be  found  in  the  New 
York  department.  The  companies  flourished,  the  department  flourished;  even  the 
Superintendent  flourished,  and  "all  went  merry  as  a  marriage  bell."  Company  after 
company  was  organized,  office  after  office  was  opened  with  a  display  of  gilded  signs 
and  luxurious  furniture,  which  almost  compelled  the  belief  that  the  description  of 
them,  in  Dickens'  Martin  Chuzzlewit,  was  intended  as  a  satire  upon  American  rather 
than  British  institutions. 

The  formation  of  companies,  too  many  of  which  were  faithfully  photograp'hed  by 
Dickens,  went  on,  until  from  seventeen  which  were  doing  business  in  this  State  upon 
the  organization  of  the  department  in  1860,  eight  of  which  were  New  York  companies, 
the  number  had  become  seventy-one  in  1870,  when  the  first  Superintendent  retired 
from  office,  forty-one  of  which  were  New  York  companies.  In  1870  times  had 
changed.  With  the  change  in  the  times  came  a  change  in  the  administration  and 
policy  of  the  department.  The  pretentious  display  of  figures  made  by  these  gilded 
institutions,  and  published  in  the  official  annual  reports,  were  at  last  to  be  brought  to 
a  practical  test.  That  test,  a  thorough  personal  examination,  in  its  first  application 
revealed  a  rottenness  truly  startling. 

Orlow  W.  Chapman  succeeded  Mr.  Miller  as  Superintendent,  and,  in  his  report 
for  1872,  he  said: 

The  teachings  of  the  past  fourteen  years'  experience,  although  by  no  means  con- 
clusive are  certainly  interesting,  important  and  highly  suggestive.  They  indicate 
nothing  against  the  wisdom  or  policy  of  life  insurance,  or  the  theory  upon  which 
it  is  based,  or  the  beneficence  of  the  system.  On  the  other  hand,  when  it  is  found, 
as  facts  show,  that  some  of  the  companies  entering  into  this  aggregate,  in  the  face 
of  this  discouraging  downward  tendency,  have  maintained  a  constantly  increasing 
growth  year  after  year,  it  presents  something  like  a  demonstration  of  the  wisdom  of 
its  plans  and  correctness  of  its  theories.  For  surely  that  business  which  is  shown 
to  be  capable  of  steady  and  uninterrupted  advancement  in  times  of  trial,  such  as  life 
insurance  has  passed  through  during  the  last  few  years,  must  have  in  it  the  very 
strongest  elements  of  prosperity,  of  safety  and  of  merit. 

John  A.  McCall,  President  of  the  New  York  Life  Insurance  Company,  read  a  paper 
in  1898  before  the  National  Convention  of  Insurance  Commissioners  in  which  he 
reviewed  their  history  from  1871  to  1898.  Following  are  some  extracts  from  his  paper: 

At  the  time  of  the  meeting  of  the  First  Convention  of  Insurance  Officials,  in  May, 
1871,  American  Life  Insurance  had  passed  through  two  distinctive  periods,  and  had 
nearly  reached  the  end  of  the  third.  In  the  first  period  life  insurance  was  done 
almost  entirely  by  proprietary  companies,  organized  primarily  for  the  transaction  of 
fire  insurance,  banking  and  trust  business.  Following  this  came  the  period  of  the 
early  mutuals  and  other  profit-sharing  companies,  doing  a  life  insurance  business 
exclusively.  The  marked  success  of  these  organizations  between  1843  and  1862 


88 

caused  a  great  multiplication  of  life  companies.  Life  insurance  shared  the  fate  of 
other  industries  of  the  time — flourished  and  grew  with  them,  as'  later  it  suffered 
with  them. 

The  nine  years  immediately  following  the  First  Convention  must  be  accounted 
the  most  trying  period  in  the  history  of  American  life  insurance.  The  number  of  com- 
panies which  ceased  doing  business  in  New  York  was  forty-six.  Only  four  reinsured 
in  companies  that  remained  solvent ;  only  ten  others  paid  their  liabilities  in  full. 
Receivers'  reports  are  incomplete,  but  a  careful  examination  of  such  as  are  accessible 
show  the  total  loss  to  policy-holders  by  failures  among  American  life  companies  to 
be  about  thirty-five  million  dollars, 'nearly  all  of  which  occurred  during  this  period. 

The  situation  was  more  acute  in  New  York  than  elsewhere  because,  of  the  forty- 
six  companies  which  ceased  doing  new  business,  twenty-seven  had  their  domicile  in 
that  State. 

The  loss  to  solvent  companies  of  business,  as  well  as  the  prestige  during  this 
period,  was  very  great. 

It  has  been  the  custom  of  writers  who  would  exalt  life  insurance  to  give  scant 
space  to  the  discussion  of  the  failures  and  losses  of  this  period ;  but  to  my  mind 
there  is  no  period  in  life  insurance  history  that  deserves  more  careful  study,  and 
none  that  contains  more  valuable  lessons  to  the  life  insurance  managers.  Why  did 
these  companies  fail?  A  true  and  complete  answer  to  that  question  would  put  every 
officer  and  every  trustee  of  a  life  company  on  his  guard  against  like  causes  and  a 
like  catastrophe.  As  we  have  already  seen,  these  failures  were  contemporaneous 
with  many  other  failures  in  the  business  world,  and  something  must  unquestionably 
be  allowed  for  the  great  shrinkage  in  values,  as  measured  by  the  currency  of  the 
country,  between  1864  and  1879.  But  the  companies  that  survived  and  increased  in 
strength  were  obliged  to  meet  the  same  conditions.  How  did  they  escape?  A  study 
of  the  report  of  this  period  shows  but  very  little  charged  off  to  profit  and  loss  by 
the  failing  companies ;  but  a  study  of  their  condition  at  the  time  of  failure  shows 
a  great  gulf  between  actual  and  assumed  values  of  assets.  In  many  of  these  com- 
panies gross  frauds  had  been  practiced  for  years,  and  a  thorough  examination  would 
have  exposed  them.  In  others,  loans  had  been  made  on  insufficient  security  and  with 
evident  profit  to  favored  individuals.  In  some  cases  loans  upon  which  neither  in- 
terest nor  taxes  had  been  paid  for  years  were  carried  on  the  books  at  their  full 
face  value. 

It  seems  clear  from  this  review  that  these  failures  resulted  from  bad  management, 
in  the  broadest  sense  of  the  term.  It  was  extravagant,  wasteful,  dishonest.  It  paid 
too  much  for  services  rendered ;  it  did  not  take  proper  care  of  the  results  obtained. 
The  data  upon  which  it  proceeded  were  not  deceptive ;  no  company  failed  because  of 
an  excessive  death  rate,  nor  (save  in  a  single  case)  because  it  was  impossible  to 
realize  a  rate  of  interest  equal  to  that  upon  which  its  premiums  were  cast.  The 
assumption  which  failed  was  that  the  loading  on  the  net  premiums  would  equal  ex- 
penses and  losses  on  investments. 

In  no  other  business  is  failure  so  disastrous  as  in  life  insurance;  in  no  other 
is  it  so  unnecessary ;  in  no  other  is  it,  therefore,  so  inexcusable.  It  is  of  no  use  to 
lay  the  blame  of  failure  upon  the  law  that  makes  a  net  valuation  the  test  of  solvency, 
because  this  law  existed  before  most  of  these  companies  began  business.  That  was 
one  of  the  conditions  of  their  life,  to  be  prepared  for  and  conformed  to,  as  much 
as  any  other  condition.  As  it  is  the  province  of  history  to  teach  us  how  we  may 
avoid  the  mistakes  of  our  predecessors,  I  venture  to  suggest  the  following  as  some  of 
the  safeguards  suggested  by  this  study. 

1.  The  utmost  care  in  making  investments — security  to  be  always  the  paramount 
consideration. 

2.  The  necessity  of  frequent  revaluations  of  securities,  and  of  their  rigid  adjust- 
ment to  changing  conditions. 

3.  The   close   study   of   a   company's   business   upon    the   principles    of   the   "Gain 
and  Loss  Exhibit"  now  required  by  several  Insurance  Departments. 

4.  The  assumption,  for  the  purposes  of  practical  administration,  of  a  higher  stand- 
ard of  reserve  than  that  by  which  the  company's  solvency  is  tested  under  the  law. 

The  first  of  these  suggestions  may  reduce  the  rate  of  interest,  but  it  will   save 


89 

the  principal ;  the  second  will  prevent  any  serious  reduction  of  assets  by  insurance 
officials;  the  third  will  locate  the  fault  of  the  administration,  if  there  be  one;  and 
the  fourth  will  preserve  a  strip  of  neutral  ground  between  the  path  the  company 
has  marked  out  for  itself  and  the  line  to  which  it  cannot  come  near  with  safety. 

In  1879  the  epidemic  of  failures  which  had  set  in  nine  years  before  had  run  its 
course;  the  patients  were  nearly  all  dead,  and  the  business  of  the  remaining  companies 
began  to  improve. 

The  period  from  1881  to  the  present  time  (1898)  has  been  one  of  uninterrupted 
progress.  There  has  been  but  one  failure  of  importance  and  the  business  has  steadily 
grown  in  public  favor.  While  it  required  fourteen  years  to  regain  the  volume  of 
insurance  and  income  reached  in  1872  and  1873,  it  only  required  seven  years  more  to 
double  it.  This  time  the  increase  came  under  healthful  financial  conditions;  it  came 
to  companies  which  had  been  tried  as  by  fire ;  and  it  came  to  stay.  The  notable 
features  of  this  period  have  been  a  decline  in  the  interest  rate,  the  rise  of  industrial 
insurance,  the  liberalizing  of  the  policy  contract,  and  an  increase  in  the  expense  rate. 

I  have  said  so  much  by  way  of  criticism  that  I  am  sure  no  one  will  grudge  me 
a  paragraph  in  praise  of  the  benefits  which  life  insurance  has  conferred  during  the 
past  twenty-seven  years.  The  companies  have,  during  that  time,  received  from  policy- 
holders  over  three  thousand  million  dollars ;  they  have  paid  over  one  thousand  millions 
in  death  claims,  and  nearly  as  much  more  in  endowments,  annuities,  dividends  and 
surrender  values. 

Mr.  McCall  brought  the  history  to  the  spring  of  1898,  which  was  about  the  be- 
ginning of  the  terrific  race  for  new  business  between  the  "Three  Giants" — the  Mutual, 
the  Equitable,  and  the  New  York  Life.  High  pressure  methods  were  the  rule,  and 
in  any  of  the  years  from  1898  to  1905  the  entire  first  premium,  and  more,  was  used 
to  secure  the  policy.  About  the  close  of  the  year  a  determined  effort  would  be  made 
to  write  business,  and  agents  would  give  all  or  most  of  their  commissions  to  the 
prospect  as  an  inducement  for  him  to  "sign  on  the  dotted  line." 

General  conditions  in  life  insurance  management  were  criticised  by  Insurance  Com- 
missioners to  the  extent  that  the  Legislature  of  New  York  authorized  an  investigation 
in  1905  under  the  following  resolution: 

Whereas,  It  appears  from  a  preliminary  report  of  the  State  Superintendent  of 
Insurance  on  the  Equitable  Life  Assurance  Society  of  New  York  that  the  interests  of 
policy-holders  and  their  beneficiaries  in  life  insurance  companies  doing  business  in 
the  State  of  New  York  are  not  properly  safeguarded  'by  existing  laws,  and  that  a 
revision  of  the  insurance  laws  of  the  State  should  be  undertaken ;  and 

Whereas,  The  inquisitorial  powers  of  the  Superintendent  of  Insurance  are  limited 
to  the  examination  of  the  officers  and  agents  of  the  companies  and  their  books  with 
reference  to  their  business,  and  with  a  view  to  their  solvency  chiefly,  and  it  is  ex- 
pedient that  as  a  basis  for  legislation  the  operations  of  such  life  insurance  companies 
should  be  investigated  as  fully  and  as  promptly  as  may  be; 

Resolved,  If  the  Assembly  concur,  that  a  joint  committee  be  appointed,  consisting 
of  three  members  of  the  Senate  and  five  members  of  the  General  Assembly,  which 
committee  shall,  after  adjournment  of  the  extraordinary  session,  proceed  to  investigate 
and  examine  into  the  business  and  affairs  of  life  insurance  companies  doing  business 
in  the  State  of  New  York,  with  reference  to  the  investments  of  said  companies,  the 
relation  of  the  officers  thereof  to  such  investments,  the  relation  of  such  companies 
to  subsidiary  corporations,  the  government  "and  control  of  said  companies,  the  con- 
tractual relations  of  said  companies  to  their  policy-holders,  the  cost  of  life  insurance, 
the  expenses  of  said  companies  and  any  other  phase  of  the  life  insurance  business 
deemed  by  the  committee  to  be  proper,  for  the  purpose  of  drafting  and  reporting 
to  the  next  session  of  the  Legislature  such  a  revision  of  the  laws  regulating  and 
relating  to  life  insurance  in  this  State  as  said  committee  may  deem  proper. 

Further  resolved,  That  the  said  committee  be,  and  it  hereby  is  authorized  and 
empowered  to  require  and  enforce  the  attendance  of  witnesses,  and  the  production 
of  books  and  papers,  to  administer  oaths  and  to  employ  counsel,  stenographers,  clerks 
and  such  other  employes  as  may  be  necessary  for  the  purposes  of  the  investigation. 


90 

And  a  sum  not  exceeding  fifty  thousand  dollars  ($50,000)  is  hereby  appropriated  out 
of  any  moneys  in  the  treasury,  not  otherwise  appropriated,  for  the  purposes  of  said 
committee. 

Pursuant  to  this  resolution,  three  members  of  the  Senate  and  five  members  of 
the  Assembly  were  appointed  as  a  committee,  with  Senator  William  W.  Armstrong 
as  chairman  of  the  committee,  and  Assemblyman  Ezra  P.  Prentice,  secretary.  The 
other  members  of  the  committee  were :  Senators  William  J.  Tully,  Daniel  J.  Riordan, 
and  Assemblymen  Robert  Lynn  Cox,  James  T.  Rodgers,  William  W.  Wemple,  John 
McKeown.  The  committee  was  assisted  by  Charles  E.  Hughes  (now  of  the  United 
States  Supreme  Court)  and  James  McKeen  as  counsel  and  Matthew  C.  Fleming  as 
assistant  counsel,  Miles  M.  Dawson  as  consulting  actuary  and  Marvin  Scudder  as 
financial  statistician. 

The  committee  organized  on  August  I,  1905,  and  began  its  public  hearings  on 
September  6,  1905,  continuing  consecutively  for  fifty-seven  sessions,  the  concluding 
session  being  held  on  the  3Oth  of  December,  1905. 

To  1905  the  general  insurance  laws  in  the  several  States  provided,  in  a  general 
way,  for  the  supervision  and  regulation  of  life  companies,  with  special  reference 
always  to  the  valuation  of  policies,  which  requirement  had  been  made  since  its  intro- 
duction in  Massachusetts  by  Elizur  Wright  in  the  early  fifties. 

After  the  report  of  the  Armstrong  Committee,  bills  were  passed  by  the  Legislatures 
of  nearly  all  of  the  States,  with  New  York  leading,  that  prescribed  policy  forms, 
limited  expenses  for  securing  business,  provided  for  net  surplus  over  and  above 
the  legal  reserve  fund,  prohibited  the  writing  of  participating  and  non-participating 
policies  by  the  same  company,  reduced  the  interest  assumption  in  valuation  of  policies 
issued  after  a  designated  date,  placed  restrictions  upon  preliminary  term  policies,  com- 
pelled the  companies  to  dispose  of  corporate  stocks,  to  discontinue  the  control  of 
or  financial  relations  with  trust  companies  and  brokerage  houses  and  speculative 
syndicates,  and  extended  the  powers  of  Superintendents  of  Insurance  in  their  examina- 
tions of  any  statistical  reports  made  by  the  companies. 

The  reports  for  1913  are  not  at  hand,  but  the  returns  as  of  December  31,  1912,  show: 

Ordinary  Business. 

Policies  in  force  8,159,103 

Insurance  in  force $i5,555,9Oi,i7i 

Policies  written  in  1912 1,285,210 

Insurance  written  in  1912 $  2,240,434,665 

Premiums   received  in   1912 • 472,062,710 

Interest  and  other  income  in  1912 183,330,994 

Total  receipts  in   1912 655,393,704 

Total  expenses  in   1912    483,348,282 

Total  to  policy-holders  in  1912 367,007,717 

Total  assets  December,   1912 3,597,650,447 

Total  liabilities  December,   1912 3,168,194,661 

Required  Reserve  Accumulation 2,988,642,224 

Surplus     451,453,644 

There  were  less  than  fifty  life  companies  in  1905.  There  were  more  than  one 
hundred  and  fifty  in  1912.  The  great  majority  of  the  new  companies  are  stock  cor- 
porations. 

The  corporate  management  of  the  life  companies  is  by  policy-holders'  meetings 
in  "Mutual  Companies;"  by  stockholders'  meetings  in  "Stock  Companies;"  and  by 
meetings  composed  of  stockholders  and  policy-holders  in  "Mixed  Companies." 


It  is  a  pet  phrase  of  fraternal  writers  and  speakers  to  declare  that  the  life  com- 
panies are  primarily  conducted  for  the  profit  of  stockholders,  while  the,  conduct  of 
fraternal  orders  is  not  for  profit,  but  for  the  benefit  of  their  members. 

It  is  never  well  to  misrepresent  the  facts.  The  Mutual  Companies  have  no  stock- 
holders. The  "profits"  are  limited  in  amount  that  can  be  paid  to  the  stockholders 
of  the  Mixed  Companies.  The  Stock,  or  Proprietary,  Companies  most  commonly  issue 
non-participating  policies  at  comparatively  low  premium  rates,  and  hence  they  volun- 
tarily set  a  limit  to  the  "profits"  for  their  stockholders. 

The  real  differences  between  the  Life  Companies  and  the  Fraternal  Beneficiary 
Societies,  on  the  business  side,  are : 

1.  The  contract  of  the  Life  Company  is  fixed,  while  that  of  the  Fraternal  Society 
i.i  flexible. 

2.  The   provision    for   expense   of   management   is   greater   in   the   Life   Company 
than  in  the  Fraternal  Society. 

3.  The  mortality  assumption  is  higher  for  the  Life  Company  level  premium  than 
for  the  level  contribution  of  the  Fraternal  Society. 

4.  The   interest  assumption  is   lower   for  the   Life   Company  level  premium  than 
for  the  level  contribution  of  the  Fraternal  Society. 

5.  The  contractual   relations   between   the   Life   Company  and  the   policy-holders 
are  those  of  a  corporation  to  an  individual,  while  the  contractual  relations  between 
the  Fraternal   Society   and  the  certificate  holders   are  those   of  a   mutual  association 
in  cooperative  effort. 

6.  Because  of  the  character  of  contractual  relations  on  the  basis  of  a  bipartite 
agreement,  the   policy-holders   in   the   Life   Company   are   not   subject   to   assessment 
even  to  save  the  corporate  existence.     The  relations  between  the  Fraternal   Society 
and  the  certificate  holders  being  mutually  cooperative,  the  members  occupy  the  dual 
position    of    insurer   and   insured   and   they   are    as   much    obligated   to   maintain   the 
integrity  of  the  insurance  contracts  as  they  are  privileged  to  claim  the  benefits  of 
those  contracts.     The  policy-holders   are  obligated   only  to  pay  their  stipulated  pre- 
miums, and  having  discharged  that  obligation  they  are  vested  with  the  right  to  demand 
the  benefit  promised.     The   certificate  holders  must  contribute   on  extra  assessments 
when  levied  as  a  condition  precedent  to  vested  right  in  the  demand  for  benefits  promised. 

It  has  always  been  a  mystery  to  me  why  the  whole  argument  in  the  case  of 
Fraternal  Societies  versus  Life  Companies  has  been  made  upon  any  misstatements 
of  the  real  issues,  when  the  facts  would  so  much  better  support  the  contention  of 
the  Societies. 

OPEN  ASSESSMENT  ASSOCIATIONS. 

The  ill-repute  of  the  Life  Companies  in  the  decade  1872-1882  brought  forth  what 
have  been  called  Open  Assessment  Associations.  The  promoters  successfully  adver- 
tised them  on  the  claim  that  they  were  organized  as  a  protest  against  the  high  pre- 
miums and  extrava-gant  management  of  the  Life  Companies,  and,  at  the  same  time, 
avoided  the  disadvantages  of  the  lodge  system  of  fraternal  orders.  They  laid  claim  to 
representative  form  of  government  through  direct  vote  in  policy-holders'  meetings 
held  every  one,  two  or  three  years.  This,  of  course,  was  as  much  a  farce  as  are 
similar  meetings  of  Mutual  Life  Companies,  but  it  served  its  purpose  to  delude 
the  public. 

I  cannot  improve  upon  the  history  of  the  Assessment  Associations  written  by 
John  A.  McCall  in  1898,  and  I  quote  him: 


92 

Another  result  of  these  same  causes  was  that  multitudes  of  men  who  felt  the 
need  of  life  insurance  protection  sought  a  substitute  for  it  in  cooperative  societies. 
I  am  aware  that  there  is  well-founded  objection  to  calling  the  operations  of  these 
societies  insurance,  and  it  will  be  stoutly  maintained  by  some  that  there  is  but  one 
system  of  real  life  insurance;  nevertheless  there  may  be  many  systems  of  post- 
mortem relief,  and  it  is  hardly  worth  while  to  quarrel  about  the  name  so  long  as 
we  apprehend  the  fact.  There  is  no  question  that  many  cooperative  societies 
operating  between  1870  and  1880,  in  spite  of  their  imperfect  system  and  because  of 
honest  management,  furnished  better  protection  to  their  patrons  than  the  level-pre- 
mium companies  whose  demise  we  have  been  considering — although  the  latter  were 
organized  upon  plans  that  were  unassailable,  ran  their  course  of  wickedness  under  the 
aegis  of  the  law,  and  died  in  the  odor  (a  very  bad  odor,  to  be  sure)  of  regularity. 
While  the  'business  oi  the  level-premium  companies  that  failed  was  but  a  small  per- 
centage of  the  whole,  and  there  were  always  sound  and  well  managed  companies 
in  the  field,  yet  the  losses  were  nevertheless  great  and  widespread,  and  it  was  little 
comfort  to  one  who  had  lost  the  accumulations  of  years  to  be  told  that  he  should 
have  insured  in  a  better  company.  A  system  that  furnished  (or  even  promised) 
present  protection  at  low  cost,  and  did  not  profess  to  accumulate  money  for  future 
needs,  appealed  very  strongly  to  men  who  did  not  understand  theories  of  insurance, 
but  who  were  angry  and  sore  at  heart  over  losses  under  a  system  that  professed  to 
be  perfect. 

There  are  no  official  data  for  ascertaining  the  number  of  co-operative  and  fra- 
ternal societies  organized  in  the  seventies,  but  there  are  now  twenty  of  each  class 
doing  business  in  New  York  State,  which  were  organized  prior  to  1880.  The  first 
Handbook  of  Assessment  Insurance  was  published  in  1886,  and  contained  the  sta- 
tistics of  367  societies,  119  of  which  were  organized  prior  to  1880.  Reports  were 
first  required  from  such  societies  by  the  Pennsylvania  Department  in  1874,  and  by 
the  Massachusetts  and  New  York  Departments  in  1882.  These  societies  have  under- 
taken to  supply  post-mortem  relief  by  levying  its  cost  upon  members  in  a  variety 
of  ways.  There  have  been  four  plans  of  assessment  insurance,  all  of  which  are  still 
in  use,  but  which  may  be  stated  in  the  order  of  their  development  and  of  their 
approach  to  the  level-premium  plan,  as  follows:  (i)  To  assess  all  members  alike 
for  current  cost  only ;  (2)  to  assess,  for  current  cost  only,  according  to  a  table 
graduated  for  age  at  entrance;  (3)  to  assess  according  to  a  table  graduated  for  age 
at  entrance,  and  lay  aside  an  arbitrary  sum  or  proprotion  of  assessments  for  a  reserve 
fund;  (4)  to  charge  a  level  premium,  calculated  upon  assumptions  which  give  rates 
approximating  those  of  level-premium  companies,  lay  aside  a  reserve  fund  on  the 
same  assumptions,  and  reserve  the  right  to  assess  for  any  definciency.  The  order 
in  which  these  plans  have  arisen,  as  well  as  their  nature  and  the  actual  workings 
of  each,  clearly  demonstrate  that  if  an  organization  would  do  what  the  level-premium 
companies  guarantee  to  do,  it  must  do  it  in  their  way,  and  that  methods  which  require 
less  from  members  provide  less  for  members,  are  likely  to  miss  the  one  great  end 
of  all  insurance — namely,  the  certainty  of  indemnity  when  the  loss  occurs. 

The  ease  with  which  such  societies  could  be  organized  and  their  comparative  free- 
dom from  official  oversight  until  within  a  few  years  led  at  one  time  to  a  speculative 
craze  in  policies  upon  the  lives  of  aged  and  invalid  persons  in  Pennsylvania,  and 
fraternal  endowment  societies  have  filched  from  the  people  of  many  States  amounts 
which  rival  the  losses  of  the  failing  level-premium  companies.  It  must  be  observed 
also  that  the  experience  of  these  societies  has  not  justified  their  philippics  against 
the  expense  rate  of  the  level-premium  companies.  The  expense  rate  of  the  level- 
premium  companies  doing  business  in  New  York  State  in  1897  was  less  than  twenty- 
three  per  cent  of  income,  while  in  the  cooperative  socities  it  was  over  twenty-eight 
per  cent  of  income. 

The  assessment  plan  of  insurance  has  never  been  a  success,  and  the  numerous 
associations  which  operated  under  the  three  plans  first  named  by  Mr.  McCall  soon 
became  involved  in  financial  difficulties,  and  in  the  decade  1895-1905  hundreds  of 
them  failed  or  were  merged  into  stronger  associations  or  companies. 

Those  associations  which  operated  under  the  fourth  plan  mentioned  by  Mr.  McCall 
were  theoretically  the  most  perfect  of  life  insurance  organizations,  and  they  should 


93 

have  been  able  to  continue  business  indefinitely  and  safely.  However,  they  were 
ultimately  forced  into  the  ranks  of  the  regular  Life  Companies  through  legislation 
against  the  Assessment  Associations,  with  which  they  were  classed. 

The  plan  (numbered  "4"  by  Mr.  McCall)  of  these  associations  was  known  as  the 
"Flexible  Premium  System,"  and  in  1896  (two  years  prior  to  Mr.  McCall's  paper) 
I  wrote  a  brochure,  entitled  "The  Flexible  Premium  System — A  Handbook  for  Field 
Men."  I  quote  from  the  "Preface,"  or  "Fore-Word"  : 

If  names  were  suggested  by  methods,  insurance  plans  should  be  grouped  under 
four  heads :  "Assessment,"  "Natural  Premium,"  "Level  Fixed  Premium,"  and  "Level 
Flexible  Premium"  Insurance. 

The  development  of  present  insurance  plans  and  methods  has  been  slow,  and 
the  sharp  lines  of  distinct  differences  have  only  been  sufficiently  apparent  from  the 
first  to  give  distinguishing  names  to  the  two  methods  of  "Assessment"  and  "Level 
Fixed  Premium"  Insurance. 

Insurance  by  "Natural  Premiums"  was  simply  assessment  insurance  with  a  recog- 
nition of  the  Mortality  Law  that  the  cost  of  insurance  increases  with  increasing  age. 
But  there  have  been  few  life  associations  which  have  adopted  and  operated  under 
the  pure  "Natural  Premium"  plan,  notwithstanding  the  fact  that  hundreds  of  con- 
cerns take  the  name  of  "Natural  Premium  Companies."  Their  methods  do  not  justify 
the  designation.  Their  rate  cards  and  literature  present  premium  charges  which  are 
held  to  be  high  enough  to  provide  for  a  reserve  that  will  render  them  level  through 
the  contract  period. 

Representation  and  calculation  allege  and  indicate  that  these  charges,  in  practical 
operation,  will  remain  level  and  uniform,  unless  future  cost  of  insurance  exceed  past 
experience  cost.  Only,  in  the  latter  event,  is  it  contemplated  to  increase  the  rates ; 
whereas,  insurance  by  "Natural  Premiums"  contemplates  a  yearly  increase  of  charges, 
from  the  age  of  entry  until  death,  or  the  termination  of  the  policy  contract. 

Evidently  it  is  a  misnomer  to  call  such  associations  either  "Natural  Premium"  or 
"Assessment"  companies.  Certainly  "Natural  Premium,"  strictly  construed,  gives  no 
indication  of  their  method  of  operation;  and  the  only  relation  to  "Assessment"  insur- 
ance, is  the  provision  in  their  contracts  to  increase  rates  to  cover  any  increase  in  the 
cost  of  insurance.  And  most  of  these  companies  are  removed  from  this  mere  semblance 
to  "Assessment"  insurance  by  making  it  optional  with  the  policy-holder  whether  or 
not  he  pay  an  increased  rate,  or  have  the  deficiency  charged  to  his  policy  and  deducted 
from  the  claim  when  it  matures. 

For  those  companies  which  base  their  rates  upon  experience  cost,  and  have  a 
stipulated  level  premium,  no  name  so  well  describes  them  as  that  of  "Flexible  Pre- 
mium"— the  "flexibility"  being  conditioned  upon  change  in  insurance  cost. 

The  1896  Act  of  the  Massachusetts  Legislature,  obliging  all  companies  operating 
under  the  "Assessment  Plan,"  to  print  "Assessment,"  in  conspicuous  letters,  in  their, 
policies  and  on  their  literature,  rate  cards,  etc.,  is  a  sure  indication  of  future  legisla- 
tion which  will  force  more  definite  distinction  in  the  representations  of  insurance 
methods. 

•  "Level  Flexible  Premium"  insurance  differs  materially  from  any  other  method, 
and  a  general  designation,  which  aptly  applies  to  "Level  Fixed  Premium,"  "Assess- 
ment," or  "Natural  Premium"  insurance,  does  not  -describe  it. 

Under  present  legislative  conditions  "Flexible  Premium"  companies  must  qualify 
under  laws  regulating  "Assessment"  insurance.  "Level  Fixed  Premium  Companies," 
seeing  that  "Level  Flexible  Premium"  organizations  are  writing  level  premium  in- 
surance, under  advantages  secured  to  them  through  qualification  under  assessment 
laws,  have  inaugurated  a  movement  to  discredit  assessment  insurance  in  any  form, 
even  to  that  of  the  Flexible  Premium.  The  Massachusetts  Act,  of  1896,  smacks  of 
paternalism  in  the  nature  of  protection  to  the  level  fixed  premium  companies,  and 
bears  such  evidences  of  favoritism  as  will  not  long  be  tolerated  by  the  people.  The 
discussion,  however,  which  naturally  comes  from  such  attempted  class  legislation,  will 
probably  result  in  a  better  general  understanding  of  insurance  methods  and  plans. 

The  Assessment  Associations  which  operated  under  the  "Flexible  Premium  Sys- 
tem" could  not  secure  legislation  that  would  distinguish  them  from  the  ordinary 
"Open  Assessment  Associations,"  and  they  could  not  continue  under  the  general 


94 

laws  for  the  supervision  and  regulation  of  Assessment  Associations  and  consequently 
they  qualified  under  the  legal  reserve  laws  for  regular  "old  line"  companies. 

The  "Safety  Clause"  in  their  contracts  corresponded  to  the  "right  to.  levy  extra 
assessments"  reserved  in  their  certificates  by  the  Fraternal  Beneficiary  Societies  that 
now  base  their  contribution  rates  upon  some  standard  table  of  mortality  with  an 
assumed  interest  earning  an  accumulation  required  to  maintain  rates  level  and  uni- 
form. This  plan  of  the  Fraternal  Societies  is  theoretically  and  practically  sound  and 
I  could  not  support  it  with  a  stronger  statement  than  I  made  in  1896  in  reference  to 
the  "Flexible  Premium  System."  I  am  still  enamored  of  the  plan  and  I  quote  from 
the  writing  of  eighteen  years  ago,  that  it  may  be  applied  to  the  flexible  premium  sys- 
tem of  the  level-rate  Fraternal  Beneficiary  Societies  of  today : 

Careful  consideration  and  study  of  existing  conditions  in  life  insurance,  as  above 
set  forth,  some  twenty  years  ago  resulted  in  the  formulation  of  the  system  known 
as  the  FLEXIBLE  PREMIUM  PLAN  of  LIFE  INSURANCE,  which 

EQUALIZES  THE  COST, 

CORRECTS  THE  ABUSES, 

AVOIDS  THE  DANGERS,  and 

MAINTAINS  THE  SAFETY  of  INSURANCE  to  an  UNEQUALLED  DEGREE. 

The  calculations  of  the  actuaries  and  the  actual  experience  of  insurance  companies 
and  societies  served  as  a  guide  in  fixing  the  premium  rates,  as  well  as  the  policy 
conditions.  The  result  is  that  the  rates  are  those  which  experience  has  shown  to  be 
sufficient  in  the  past,  and  which  will  remain  uniform  and  level  so  long  as  the  past 
average  of  insurance  cost  is  maintained. 

The  cost  of  insurance  is  equalized  by  requiring  payments  in  excess  of  insurance 
needs  during  the  earlier  years,  thus  creating  a  reserve,  as  fully  explained  in  illustrating 
the  operation  of  level  premium  insurance.  The  flexible  premium  in  nowise  differs 
from  the  level  premium  in  this  respect,  but  under  the  most  improved  policy  contracts, 
the  company  binds  itself  to  keep  each  policy's  proportion  of  the  reserve  fund  equal  to, 
or  greater  than,  the  difference  between  the  present  worth  of  the  future  net  premiums 
and  the  present  worth  of  the  amount  insured,  thus  enabling  these  companies  to  equalize 
and  keep  level  the  premium  rates,  in  identically  the  same  way  as  done  by  the  old 
line  or  level-premium  companies — with  the  marked  advantage,  however,  in  the  privi- 
lege, under  the  flexible  premium  plan,  of  having  the  entire  reserve  fund  always  sub- 
ject to.  the  payment  of  all  losses,  instead  of  having  it  subject  only  to  each  policy's 
proportionate  share. 

The  abuses  arising  from  waste  of  funds,  as  heretofore  instanced  and  emphasized, 
is  corrected  under  the  flexible  premium  system  by  limitation,  in  the  policy  contract, 
of  expense  charges.  Thus  the  surplus,  whether  from  lapse,  surrender,  interest  earn- 
ings, or  other  sources,  is  of  the  general  reserve  fund,  and  must  be  exclusively  used 
for  the  benefit  of  policy-holders. 

The  dangers  possible  from  a  reduction  of  rates  to  the  cost  of  insurance,  as  in- 
dicated by  past  experience,  are  avoided  under  the  flexible  premium  system  by  the 
simple  and  effective  provision,  which  enables  the  company  to  collect  an  increased  pre- 
mium sufficient  to  meet  the  increased  cost.  In  other  words,  the  premium  rate  is  not 
fixed  and  unchangeable  as  with  the  level  premium  rates,  but  they  are  left  flexible  so 
as  to  cover  any  change  that  may  come  into  the  cost  of  insurance. 

It  is  utterly  impossible  to  positively  anticipate  either  a  future  death-rate  or  the 
future  value  of  investments. 

The  greatest  care  may  be  exercised  in  making  conservative  mortality  estimates 
as  well  as  endeavoring  to  invest  only  in  good  and  safe  securities,  yet  a  "Black  Plague" 
may  change  the  death-rate,  or  a  "Black  Friday"  knock  the  bottom  out  of  values. 

Safety  is  the  keystone  of  the  arch  upon  which  rests  the  whole  superstructure  of 
life  insurance. 

Safety  is  the  foundation  principle  of  life  insurance,  and  safety  must  be  assured 
beyond  peradventure. 

This  is  accomplished  under  FLEXIBLE  PREMIUM  INSURANCE  beyond  any 
sort  of  question. 

So  long  as  the  death-rate  remains  the  same,  and  financial  conditions  do  not  affect 
the  value  of  securities,  premium  rates,  feased  upon  experience  cost,  will  remain  the 
same.  Should  conditions  arise  whereby  the  cost  of  insurance  is  increased,  the  policy- 
holders  must  justly  and  rightly  contribute  their  share  to  the  payment  of  this  increased 
cost,  and  the  company  reserves  the  right  to  require  it  of  them. 


95 

While  SAFETY  is  thus  assured,  cheapness  is  secured  and  waste  and  insolvency 
made  impossible.  Waste  is  not  possible  because  of  the  limitation  to  expense  of  man- 
agement; insolvency  is  not  possible  -because  the  income  can  be  increased  as  the 
exigencies  of  insurance  cost  may  require. 

Hence,  it  follows  that 

THE  FLEXIBLE  PREMIUM  SYSTEM 

COMBINES  ALL  OF  THE  DESIRABLE  FEATURES  AND  BASIC  PRINCIPLES  TO  MAKE 

THE  PERFECT  SYSTEM  OF  LIFE  INSURANCE. 

It  is  especially  adapted  to  the  combination  of  those  most  desirable  features, 
CHEAPNESS  and  SAFETY. 

I  give  the  following  statistics,  as  of  December  31,  1912: 

Number  of  Assessment  Associations 135 

Number  of  Certificates • 484,228 

Insurance  in  force $428,344,892 

Amount  written  in  1912 100,639,042 

Total   income   in    1912 1 1,184,473 

Total  disbursements  in   1912 10,017,766 

Total   admitted  assets 10,674,094 

Total    liabilities    • 2,71 1,601 

Of  the  135  associations,  which  are  given  in  the  Spectator's  Year  Book  none  remain 
of  the  large  ones  existing  in  the  decade  1891-1901.  The  Mutual  Reserve  Fund  (which 
once  expended  $30,000  for  a  private  yacht  and  entertainment  of  Insurance  Commis- 
sioners in  convention  on  the  St.  Lawrence),  Bay  State,  Massachusetts  Benefit,  North- 
western Life,  Old  Wayne  Mutual  and  hundreds  of  others,  which  carried  'millions  of 
insurance  in  1891-1901,  are  gone  out  of  existence. 

Many  of  the  135  have  been  organized  since  1901,  and  most  of  these  are  doing 
business  in  the  South  amongst  the  negroes  of  that  section.  Those  in  existence  Decem- 
ber 31,  1912,  which  commenced  business  prior  to  1902,  are  largely  confined  to  the 
members  of  some  order,  profession  or  occupation.  A  list  of  them  no  doubt  will  be 
of  interest : 

Year 
Organized.  Name  of  Organization. 

1886  Albany  Women  Teachers'  Relief  Association,  Albany,  N.  Y. 

1889  American  Temperance  Life  Insurance  Association,  New  York  City. 

1901  American  Mutual  Benefit  Society,  Baltimore,  Md. 

1884  Catholic  Knights  of  Illinois,  State  Council,  Belleville,  111. 
1882  Columbian  Protective  Association,  Binghamton,  N.  Y. 

1880  Commercial  Travelers'  Life  and  Accident  Ass'n  of  Cleveland,  Cleveland,  Ohio. 

1881  Commercial  Travelers'  Mutual  Benefit  Association,  Toronto,  Can. 
1849  Cremieux  Benevolent  Society,  New  York  City. 

1885  DeWitt  Clinton  Ready  Relief  Association,  Brooklyn,  N.  Y. 

1886  Empire  State  Degree  of  Honor,  Supreme  Lodge,  Stockton,  N.  Y. 
1869  Expressmen's  Mutual  Benefit  Association,  New  York  City,  N.  Y. 
1895  Globe  Mutual  Life  Insurance  Association,  Chicago,  111. 

1878  Gold  and  Stock  Life  Insurance  Association,  New  York,  N.  Y. 
1884    Golden  Eagle  Association,  Brooklyn,  N.  Y. 

1884  Home  Friendly  Society,  Baltimore,  Md. 

1897  Illinois  Bankers  Life  Association,  Monmouth,  111. 

1892  Industrial  Life  and  Health  Insurance  Company,  Atlanta,  Ga. 

1872  Insurance  Clerks'  Mutual  Benefit  Association,  New  York,  N.  Y. 

1884  Jewelers  Safety  Fund  Society,  New  York  City. 

1877  Knights  Templar  and  Mas.  Mutual  Aid  Association,  Cincinnati,  Ohio. 

1879  Lutheran  Mutual  Aid  Society,  Waverly  Iowa. 
1872  Masonic  Life  Association,  Buffalo,  N.  Y. 


96 

1894  Merchants'  Life  Association,  Burlington,  la. 

1879  Minnesota  Scandinavian  Relief  Association,  Red  Wing,  Minn. 

1893  Mutual  Aid  Society  of  Lutherans,  Toledo,  Ohio. 

1887  Mutual  Benefit  Association  of  Fifth  Street  Baptist  Church,  Troy,  N.  Y. 

1876  Mutual  Benefit  Association  of  Suffolk  County,  Riverhead,  N.  Y. 
1896  Mutual  Life  Asssociation  of  Iowa,  Red  Oak,  la. 

1899  National  Benefit  Association,  Washington,  D.  C. 

1900  National  Life  Association,  Des  Moines,  la. 

1898  Nebraska  Mutual  Life  Insurance  Co.,  Hastings,  Neb. 

1868  New  York  Physicians'  Mutual  Aid  Association,  New  York  City. 

1883  New  York  Safety  Reserve  Fund,  Syracuse,  N.  Y. 

1899  North  Carolina  Mutual  and  Provident  Association,  Durham,  N.  C. 
1875  Northwestern  Traveling  Men's  Association,  of  Chicago,  Chicago,  111. 

1895  Postal  Employes'  Mutual  Aid  Association,  New  York  City,  N.  Y. 
1886  Protective  Life  Assurance  Society,  Buffalo,  N.  Y. 

1883  Provident  Association  of  Newtown,  L.  I.,  Maspeth,  L.  I.,  N.  Y. 
1874  Railway  Mail  Mutual  Benefit  Association,  Chicago,  111. 

1894  Scandinavian  Mutual  Aid,  Minden,  Neb. 

1884  Seventh  Regiment  Vet.  &  Act.  League,  New  York  City,  N.  Y. 
1882  St.  Lawrence  Life  Association,  New  York. 

1877  Stafford  Benefit  Association,  Stafford,  N.  Y. 

1898  Surety  Fund  Life  Company,  Minneapolis,  Minn. 

1899  Swedish  Baptist  Mutual  Aid  Association  of  America,  Chicago,  111. 

1878  Swedish  Methodist  Aid  Association,  Chicago,  111. 

1885  Swedish  Mutual  Aid  Society  "Scandia"  in  N.  Y.,  New  York  City. 
1867  Telegraphers'  Mutual  Benefit  Association,  New  York  City,  N.  Y. 
1882  Toledo  Traveling  Men's  Association,  Toledo,  Ohio. 

1898  Union  Mutual  Aid  Association,  Mobile,  Ala. 

1878  Western  Commercial  Travelers,  St.  Louis,  Mo. 

1884  Western  Life  Indemnity,  Chicago,  111. 

1886  Western  Masons'  Mutual  Life  Association,  Los  Angeles,  Cal. 

1886  Workingmen's  Cooperative  Association  of  the  U.  I.  L.  of  N.  Y.,  New  York  City 

1878  Young  Men's  Mutual  Life  Association,  Cincinnati,  Ohio. 


INDUSTRIAL  INSURANCE  COMPANIES. 

Industrial  insurance,  although  in  operation  in  England  since  1854,  was  first  intro- 
duced into  this  country  in  1873.  In  1880  three  companies  were  issuing  this  form  of 
indemnity,  and  the  amount  in  force  at  the  end  of  the  year  was  somewhat  over 
$13,000,000.  On  December  31,  1912,  the  number  of  policies  in  force  was  nearly 
27,000,000,  insuring  nearly  four  thousand  million  dollars.  The  amount  insured  under 
industrial  policies  now  exceeds  the  total  life  insurance  in  force  in  this  country  prior 
to  1880. 

Its  salient  features  have  been  (i)  weekly  collections  of  premiums  at  the  homes 
of  the  insured;  (2)  the  insurance  of  the  whole  family;  (3)  uniform  rates  for  males 
and  females ;  (4)  limitation  of  the  amount  of  insurance  upon  lives  under  ten  years  of 
age  to  burial  fund  proportions. 

Premiums  are  five  cents  per  week  and  upward;  insurance  $15  and  upward.  The 
average  premium  is  about  ten  cents  per  week,  and  the  average  insurance  about  $125. 

The  industrial  companies  have  had  to  overcome  anew  the  prejudice  which  was 
formerly  directed  against  the  companies  insuring  for  larger  amounts.  Professional 
philanthopists  have  again  and  again  conjured  up  the  spectre  of  children  starved  and 
murdered  for  the  sake  of  an  insurance  that  would  scarcely  afford  decent  burial.  Over 
against  the  spectre  the  industrial  companies  have  once  and  again  set  the  facts,  showing 


97 

care  in  the  selection  of  risks  and  in  the  payment  of  claims,  and  the  further  fact  that 
the  mortality  among  insured  infants  is  lower  than  the  average  infantile  mortality. 
Over  against  accusations  of  placing  burdens  upon  poverty  the  companies  have  shown 
that  an  increase  in  industrial  insurance  has  gone  hand  in  hand  with  an  increase  in  sav- 
ings bank  deposits. 

As  bearing  upon  the  history  of  Life  Insurance,  several  points  must  be  noted : 

i — The  industrial  companies  have  immensely  broadened  the  field  of  Life  Insur- 
ance. They  have  not  only  extended  its  benefits  to  a  large  number  of  persons  insuring 
for  small  amounts,  but  they  have  included  classes  heretofore  considered  uninsurable. 
They  have  demonstrated  that  it  is  possible  to  ascertain  and  cover  by  an  adequate 
premium  the  risk  of  death  upon  practically  every  healthy  human  being  who  is  not 
living  in  flagrant  violation  of  moral  and  hygienic  laws.  The  companies  have  been 
obliged  to  contend  with  a  death  rate  among  adults  nearly  twice  as  great  as  that  which 
has  prevailed  among  the  companies  doing  an  ordinary  life  insurance  business,  and  to 
ascertain  by  actual  experience  the  death  rate  among  children ;  but  they  have  within 
comparatively  few  years  obtained  the  facts,  and  reduced  them  to  a  science,  upon  which 
they  have  upreared  the  stately  structure  of  Industrial  Insurance.  The  number  of 
industrial  policies  now  in  force  is  over  three  times  as  great  as  the  number  of  ordinary 
policies ;  and,  while  the  amounts  are  small,  who  shall  say  that  the  service  done  each 
family  is  not  as  great  in  the  one  case  as  in  the  other? 

2 — Again,  the  industrial  companies  have  shown  that  it  is  worth  while  to  do  small 
things  in  order  to  accomplish  great  things — that  the  business  will  bear  whatever  expense 
is  necessary  to  do  it  in  the  best  way.  The  companies  have  learned  that  the  industrial 
classes  will  not  save  money  and  pay  for  insurance  by  quarterly  or  monthly  premiums ; 
that  they  will  not  take  insurance  that  involves  remittances  by  mail  or  by  periodical 
payments  at  an  office :  but  that  they  will  cheerfully  pay  the  cost  of  it,  if  it  is  brought 
to  their  homes  and  sold  on  weekly  installments. 

3 — If  we  look  closely  we  shall  perceive  that  industrial  insurance — so  far  as  it 
applies  to  infants — has  introduced  a  new  principle.  Every  other  kind  of  insurance  is 
indemnity  for  value  lost ;  infantile  insurance  is  indemnity  for  expense  incurred.  The 
infant  life  has  no  pecuniary  value;  it  does  not  produce — it  consumes;  but,  if  it  ceases, 
an  expense  must  be  incurred  for  its  burial.  The  expense  of  its  maintenance,  if  it  lives, 
can  be  provided  for  by  the  earnings  of  parents,  because  this  expense — like  these 
earnings — will  be  so  distributed  as  to  require  but  little  outlay  each  week.  So  the 
expense,  involving  the  instant  outlay  of  a  week's  wages  or  more,  can  be  met  in  the 
same  way  by  industrial  insurance.  It  is  not  exactly  insurance  upon  life,  but,  in  the 
language  of  the  charters  and  of  the  law,  "insurance  pertaining  to  life." 

CHILD    INSURANCE. 

In  1907  the  National  Fraternal  Congress  instructed  the  Committee  on  Statistics  to 
report  concerning  "Child  Insurance,"  and  I  prepared  for  the  Committee  a  statement 
which  required  several  months  of  labor  and  research,  involving  inquiries  of  Industrial 
Companies  in  the  United  States  and  Friendly  Societies  and  Industrial  Companies  of 
Great  Britain  in  regard  to  practical  operation.  I  received  several  thousand  pages  of 
printed  and  typewritten  matter  and  condensed  the  information  into  a  typewritten  state- 
ment of  about  80  pages  for  the  Committee. 

When  no  advantage  was  taken  by  the  Congress  of  this  mass  of  data,  I  made  an 
arrangement  with  Metropolitan  Life,  of  New  York,  whereby  that  company  would  re- 
insure all  child  Insurance  Business  obtained  by  Fraternal  Beneficiary  Societies.  I  pre- 
pared a  policy  form  which  was  acceptable  to  the  Metropolitan  Actuaries  and  was 
approved  by  leaders  amongst  fraternal  society  officials — and  the  plan  for  reinsurance 
was  likewise  approved. 

The  members  and  deputies  of  the  Societies  were  to  make  or  secure  the  applications 
and  send  them  to  the  head  office  of  the  Society,  under  the  same  regulations  for  other 
applications;  and  the  collectors  for  the  Society  were  to  make  collections  (monthly 


98 

instead  of  weekly)  as  other  collections  were  made.  There  were  no  dealings  between 
members  or  deputies  and  the  Industrial  Company.  The  latter  merely  assumed  the 
insurance  risk  and  received  periodical  remittances  from  the  Society  direct. 

An  agreement  was  entered  into  with  several  Societies  to  carry  out  the  plan,  but 
the  general  sentiment  of  the  officials  of  Fraternal  Societies  was  antagonistic,  and, 
personally,  I  was  severely  criticised  for  proposing  "an  unholy  alliance  with  the  arch 
enemy  of  the  Fraternal  System."  The  adverse  comment  caused  the  officials  to  with- 
draw from  the  agreement,  and  the  plan  of  reinsurance  came  to  naught. 

I  had  become  accustomed  long  before  to  criticism,  and  to  having  my  motives  mis- 
understood and  misconstrued  and  unjustly  condemned,  and  I  pursued  the  even  tenor 
of  my  way,  depending  upon  time  for  my  justification. 

One  of  the  gravest  and  most  serious  mistakes  which  has  been  made — continuously 
and  persistently  made  from  the  very  beginning — by  the  officials  of  Fraternal  Beneficiary 
Societies  has  been  to  assume  an  eternal  and  inevitable  conflict  between  the  Societies 
and  the  Life  Companies. 

The  Societies  are  not  organized  for  the  efficient  handling  of  certain  forms  of  insur- 
ance, and  it  would  be  much  better  that  they  confined  their  operation  to  the  original 
idea  of  protection  against  dependency  of  members  and  their  beneficiaries,  and  thereby 
retain  statutory  privileges  and  exemptions. 

Correct  and  commendable  relations  between  the  Societies  and  the  Life  Companies 
would  permit  of  "reinsuring  surplus  lines"  of  the  former  by  the  latter  on  the  like 
amicable  and  satisfactory  terms  as  in  practice  now  existing  between  Life  Companies. 

The  Fraternal  Beneficiary  Societies  have  the  organized  machinery  for  securing 
business  at  much  less  expense  than  can  be  done  by  the  Ordinary  or  Industrial  Life 
Companies.  They  are  especially  well  equipped  for  securing  the  business  for  "Child 
Insurance"  and  "Group  Insurance,"  though  handicapped  in  several  ways  in  success- 
fully taking  care  of  such  business,  even  when  permitted  to  do  so  by  State  Legislation. 

I  appreciated  the  difficulties  to  be  overcome  by  Fraternal  Orders  before  they  could 
grant  Child  Insurance,  and  believed  I  was  doing  something  for  their  good  when  I 
arranged  the  reinsurance  plan. 

The  Industrial  Companies  cannot  successfully  carry  on  their  business  outside  of 
the  population  centers.  To  make  weekly  collections  a  collector  must  be  able  to  see 
several  scores  of  persons  in  a  day,  which  is  impossible  except  in  thickly  populated 
districts. 

By  means  of  the  lodge  system  the  collectors  for  Fraternal  Beneficiary  Societies  could 
attend  to  the  payments  by  members  for  insurance  on  their  children,  and  thus  bring 
this  beneficent  protection  to  the  homes  of  hundreds  of  thousands  in  the  country  dis- 
tricts and  towns  and  small  cities  that  cannot  be  reached  by  the  Industrial  Companies. 
Even  in  the  large  cities,  the  Fraternal  Beneficiary  Societies  have  a  membership  whose 
homes  are  not  entered  by  these  Companies.  There  would  be  very  little  competition 
between  the  Societies  and  Companies  in  the  conduct  of  "Child"  or  "Juvenile"  Insur- 
ance, and  there  is  no  ground  other  than  that  of  prejudice  for  objection  to  cooperation 
between  the  Societies  and  the  Companies. 

At  any  rate,  between  three  and  four  millions  of  children  go  uninsured  through 
the  failure  of  the  Fraternal  Orders  to  engage  in  it,  or  otherwise  encourage  it.  The 
Industrial  Companies  have  about  ten  millions  of  children  of  the  twenty-seven  millions 
insured  December  31,  1912. 

As  to  the  "Group"  Insurance,  there  is  criticism  of  the  Life  Companies  for  under- 
taking it,  and  yet  the  Fraternal  Managers,  with  every  facility  for  promoting  it,  stand 


99 

by  and  neglect  their  opportunities.  This  class  of  insurance  would  be  fittingly  appro- 
priate for  reinsurance  relations  with  the  Life  Companies. 

The  accumulated  encumbrances  of  years  have  narrowed  the  scope  of  operation  for 
Fraternal  Beneficiary  Societies,  and  before  the  officials  can  come  to  an  agreement  con- 
cerning Group  Insurance,  I  fear  the  Life  Companies  will  have  the  lion's  share. 

Returning  to  the  subject  of  "Juvenile  Insurance,"  I  conclude  with  reproducing  the 
report  of  the  Committee  on  Statistics  and  Good  of  the  Orders  to  the  National  Fra- 
ternal Congress,  in  session  at  Put-in-Bay  in  1908 : 

PUT-IN-BAY,  Lake  Erie,  August  19,  1908. 
To  the  Officers  and  Members  of  the  National  Fraternal  Congress : 

Your  Committee  on  Statistics  and  Good  of  the  Orders  begs  leave  to  submit  its 
report  on  the  matter  of  Industrial  Insurance,  in  accordance  with  the  terms  of  the 
resolution  offered  by  Mr.  Gerard  at  the  meeting  of  the  Congress  last  year,  which  is 
as  follows : 

"Whereas,  There  is  a  demand  among  the  membership  of  Fraternal  Beneficial  Socie- 
ties for  some  form  of  industrial  protection  for  minor  members  of  their  families ; 

"Therefore,  Be  it  Resolved,  That  this  question  be  referred  to  the  Committee  on 
Statistics  and  Good  of  the  Orders,  to  be  hereafter  appointed,  to  investigate  the  legal 
requirements  necessary  to  amend  the  present  laws  in  the  various  States,  and  to  submit 
plans  and  rates  necessary  to  provide  for  Industrial  Insurance,  to  be  confined  exclu- 
sively to  the  families  of  members  of  Fraternal  Beneficial  Societies,  at  next  session  of 
this  Congress." 

It  will  be  observed  that  the  resolution,  in  substance,  asks  that  we  ascertain  whether 
such  work  might  be  advantageously  undertaken  by  the  various  orders  here  represented, 
and,  if  so,  whether  the  laws  of  the  various  States  would  permit  us  to  do  so. 

Soon  after  the  close  of  the  last  meeting  of  the  Congress  we  addressed  a  letter  to 
the  president  of  each  order  here  affiliated,  requesting  his  or  her  views  on  this  subject, 
and  also  requesting  them  to  make  inquiries  as  to  the  probable  demand  for  such  benefit 
among  their  "field  workers"  and  members.  We  regret  to  say  that  but  few  of  those 
thus  written  gave  the  matter  such  attention  as  we  desired,  hence  we  are  not  in  a 
position  at  this  time  to  indicate  what  the  demand  for  such  benefits  would  be,  although 
those  who  did  seem  to  give  it  attention,  reported  quite  a  large  proportion  of  their 
members  as  being  patrons  of  the  Commercial  Industrial  Companies,  and  as  in  full 
sympathy  with  the  establishment  of  such  departments  in  connection  with  our  other 
work.  We  then  concluded  to  give  the  matter  a  careful  examination  and  learn  what 
we  could  of  the  subject  generally.  To  this  end  we  sought  the  advice  of  Mr.  Abb 
Landis,  who  is  well  known  to  all,  as  to  the  best  sources  of  such  information,  and  were 
very  agreeably  surprised  and  much  pleased  to  learn  that  he  would  glady  help  us  in 
the  matter  ©feathering  the  data  needed,  and  when  he  coupled  with  this  offer  a  willing- 
ness to  do  this  without  making  a  charge  for  his  service,  we  gladly  took  advantage  of 
his  generosity. 

Mr.  Landis  has  furnished  us  what  appears  to  be  a  very  comprehensive  and  ex- 
haustive paper  or  report  on  "Industrial  Insurance,"  covering  about  sixty  pages  of 
typewritten  matter,  in  which  he  deals  with  every  element  that  we  should  understand 
pertaining  to  the  history,  purpose  and  plan,  as  well  as  the  cost  and  experience  of  the 
companies  doing  that  line  of  work  here  and  abroad.  Your  Committee  would  like  to 
have  taken  the  time  to  present  his  views  on  the  subject  to  this  Congress,  but  came  to 
the  conclusion  that  it  would  be  best  to  submit  with  our  report  this  report  of  Mr. 
Landis,  which  the  Congress  may  have  printed  if  it  wishes  to  do  so.  Regardless  of 
the  action  of  the  Congress  in  this  relation,  your  Committee  wishes  to  give  Mr.  Landis 
due  credit  for  his  advice  and  for  the  generous  contribution  he  made  to  our  fund  of 
information,  upon  which  we  shall  make  frequent  and  liberal  drafts  in  what  we  shall 
have  to  offer. 

The  business  of  industrial  insurance,  as  we  know  it  now,  is  not  an  American 
product :  it  is  an  imported  article  coming  here  from  England.  It  was  first  introduced  in 
its  present  form  by  the  Friendly  Societies  of  Great  Britain.  Its  main  purpose  is  to 
secure  a  decent  funeral  and  burial  for  the  person  insured,  and  is  largely  used  by  parents 


100 

for  the  benefit  of  their  minor  children,  although  all  the  commercial  companies  insure 
adults  as  well. 

The  Prudential  Company  of  Newark,  N.  J.,  was  the  first  to  establish  this  business 
in  America.  It  was  authorized  in  1873  by  special  act  of  the  New  Jersey  legislature 
as  "The  Widows'  and  Orphans'  Friendly  Society."  In  1875  its  name  was  changed 
to  the  ''Prudential  Friendly  Society,"  and  later  to  the  "Prudential  Insurance  Com- 
pany of  America."  The  capital  was  originally  $25,000;  its  capital  is  now  and  has  been 
since  1893,  $2,000,000.  Of  this  amount  only  $91,000  was  paid  in  in  cash;  the  balance 
represents  profits  capitalized.  The  company  has  been  a  liberal  dividend  payer  all  these 
years.  In  short,  the  business  has  been  very  profitable  and  this  company  is  a  fair  example 
of  all  the  other  established  companies  doing  this  line  of  business.  The  Metropolitan  is 
the  largest  of  such  companies,  and  that  you  may  have  a  fair  idea  of  the  volume  of 
such  business  in  this  country,  it  may  be  said  that  it  had  over  9,620,000  policies  in  force 
at  the  close  of  1907.  Its  income  that  year  was  more  than  $73,000,000.  The  new  indus- 
trial business  written  by  it  and  paid  for  was  over  $254,000,000  and  the  number  of  claims 
paid  were  137,270.  Its  net  gain  in  policies  for  the  year  was  over  600,000.  In  other 
words,  this  line  of  insurance  work  has  become  very  popular  in  recent  years,  and 
through  the  thorough  organization  of  the  large  companies  it  has  become  very  profitable. 
And  yet  it  cannot  be  said  there  was  any  demand  for  such  a  business.  It  took  the 
Metropolitan  company  over  five  years  to  reach  the  point  where  the  business  took 
care  of  itself.  It  was  necessary  for  that  company  to  import  from  Great  Britain  a  force 
of  two  thousand  experienced  industrial  insurance  workers  to  establish  their  business 
in  all  its  departments.  The  demand  had  to  be  created,  just  as  is  the  case  today  in 
any  department  of  insurance  work,  excepting,  in  a  limited  way,  only  fire  insurance. 
The  business  is  now  well  established,  but  it  is  all,  practically,  in  the  hands  of  the  com- 
mercial companies.  It  has  been  diverted  from  the  Friendly  Societies  to  the  com- 
panies for  profit.  Everybody  knows  that  it  is  grossly  expensive  as  compared  with 
even  ordinary  life  insurance — made  so  by  the  system  and  plan  of  operation.  The  cost 
of  securing  the  business  in  the  first  place  is  necessarily  great  in  proportion  to  the 
premiums  paid  by  the  insured,  since  the  great  bulk  of  the  premiums  are  not  more 
than  ten  cents  per  week,  and  in  most  cases  of  infants  or  children  under  ten  years  of 
age,  only  five  cents.  The  collections  are  made  weekly  at  the  home  of  the  insured,  by 
paid  collectors,  who  are  also  solicitors,  and  the  work  of  taking  care  of  the  business 
at  the  home  office  is  correspondingly  greater  than  the  ordinary  life  insurance  business. 
President  Hegeman  of  the  Metropolitan  Company  says  that  the  work  of  securing 
and  caring  for  this  business,  as  compared  with  ordinary  life  insurance,  is  as  eighteen 
to  one,  while  the  expense  is  as  two  and  one-fourth  to  one. 

In  the  matter  of  expense,  the  Prudential  is  about  the  same  as  the  others.  For 
1907  their  experience  was  as  follows: 

Ordinary  Life  Department   18.05  per  cent. 

Industrial    Department    37-27  per  cent. 

One  of  the  remarkable  facts  connected  with  the  development  of  this  work  is  the 
relation  between  population  and  industrial  policies  in  force,  as  will  appear  from  the 
following  table  compiled  by  Mr.  Landis : 

Percentage  Percentage  of 

of  Policies  in 

Ages.  Population.  Force,  1904. 

i  to     4  inclusive  9-57  9-57 

I  to    9  inclusive  21.28  22.47 

i  to  14  inclusive  31-94  34-66 

i  to  19  inclusive  41.91  45-35 

5  to  17  inclusive  28.42  31.65 

20  to  29  inclusive  18.29  17.68 

30  to  39  inclusive  13-88  12.83 

40  to  49  inclusive  10.16  9.96 

50  to  59  inclusive  8.80  8.06 

60  to  69  inclusive  4.08  4.86 

i  to  69  inclusive  95-12  98.74 


101  '' 

Some  may  be  under  the  impression  that  such  insurance  on  the  lives  of  children 
tends  to  crime  or  neglect,  but  our  investigation  of  this  matter  leads  us  to  the  conclu- 
sion that  such  impressions  are  wholly  erroneous  and  unfounded ;  that  there  is  no 
evidence  to  establish  this  fact  that  does  not  apply  with  equal  force  to  adult  insurance. 

The  people  who  generally  patronize  these  companies  are  poor  and  whose  means 
seem  to  impel  them  to  buy  this  form  of  protection  because  they  can  get  it  for  a  few 
cents  per  week,  without  apparently  realizing  that  in  proportion  to  the  benefits  to  be 
secured  they  are  paying  an  exorbitant  price.  This  is  not  the  fault  of  the  companies 
because  under  their  system  it  is  doubted  if  it  could  be  furnished  at  very  much  less. 

Now,  let  us  see  what  the  companies  give  for  the  weekly  premium  of  five  and  ten 
cents,  and  let  it  be  remembered  that  a  weekly  premium  of  five  cents  means  $2.60  per 
year,  while  a  ten-cent  weekly  premium  means  $5.20  per  year. 


INFANTILE  TABLE 


Weekly  Premium,  5  cents. 
Benefit  Payable  if  Policy  has 


Premiums  Cease  at  Age  75. 

Age  Next  Birthday  When  Policy 

is  Issued 


2 

3 

4 

5 

6 

7 

8 

9 

Less  than  6  months  

$12.50 
25.00 
34.00 
40.00 
48.00 
58.00 
70.00 
110.00 
145.00 
173.00 

$17.00 
34.00 
40.00 
48.00 
58.00 
70.00 
105.00 
140.00 
169.00 

$20.00 
40.00 
48.00 
58.00 
'70.00 
100.00 
135.00 
165.00 

$24.00 
48.00 
58.00 
70.00 
95.00 
130.00 
160.00 

$29.00 
58.00 
70.00 
90.00 
125.00 
155.00 

$35.00 
70.00 
85.00 
120.00 
150.00 

$40.00 
80.00 
115.00 
145.00 

$55.00 
110.00 
140.00 

Over  6  months,  under  1  year  

One  year 

Two  years 

Three  years 

Four  years  

Five  years  

Six  years  

Seven  years  

Eight  years  

No  infantile  policies  will  be  issued  with  a  weekly  premium  of  ten  cents. 


INFANTILE  TABLE. 


Weekly  Premium,  3  cents. 
Benefit  Payable  if  Policy  has 


Premiums  Cease  at  Age  75. 

Ag<e  Next  Birthday  When  Policy 

is  Issued 


2 

3 

4 

5 

6 

7 

8 

9 

Less  than  6  months  

$  7.00 
15.00 
20.00 
24.00 
29.00 
35.00 
42.00 
66.00 
87.00 
104.00 

$10.00 
20.00 
24.00 
29.00 
35.00 
42.00 
63.00 
84.00 
101.00 

$13.00 
24.00 
29.00 
35.00 
42.00 
60.00 
81.00 
99.00 

$14.00 
29.00 
35.00 
42.00 
57.00 
78.00 
96.00 

$17.00 
35.00 
42.00 
54.00 
75.00 
93.00 

$21.00 
42.00 
51.00 
72.00 
90.00 

$24.00 
48.00 
69.00 
87.00 

$33.00 
66.00 
84.00 

Over  6  months,  under  1  year  

One  year 

Two  years  .    ... 

Three  years  

Four  years  

Five  years  

Six  years  

Seven  years  

Eight  years   

102 

When  the  person  to  be  insured  is  less  than  ten  years  of  age  next  birthday,  the 
amount  of  benefit  payable  depends  upon  the  length  of  time  the  policy  has  been  in  force. 
Thus,  if  a  child  is  five  years  of  age  next  birthday  when  the  policy  is  issued  and  the 
policy  remains  in  force  three  years,  the  insurance  for  a  weekly  premium  of  five  cents 
will  be  $95.  After  the  policy  has  been  in  force  four  years  the  insurance  will  be  $130, 
and  after  it  has  been  in  force  five  years  it  will  provide  for  a  payment  of  $160  at  death. 

By  this  time,  however,  the  child  will  be  ten  years  of  age  next  birthday,  and  there- 
after the  amount  of  insurance  will  remain  at  $160. 

In  no  case  will  any  policy  be  written  for  a  greater  amount  of  insurance  than  set 
forth  in  the  following  table,  nor  will  any  policy  be  written  which  together  with  any 
other  insurance  then  in  force,  in  this  or  any  other  company,  would  make  the  total 
amount  of  insurance  in  force  exceed  the  amounts  stated  in  this  table. 


Age 

Limit 

Age 

Limit 

Age 

Limit 

Age 

Limit 

next 

of 

next 

of 

next 

of 

next 

of 

Birthday. 

Insurance. 

Birthday. 

Insurance. 

Birthday. 

Insurance. 

Birthday. 

Insurance. 

2 

$30.00 

7 

$140.00 

12 

$380.00 

17 

$()12.00 

3 

34.00 

8 

168.00 

13 

460.00 

18 

700.00 

4 

40.00 

9 

200.00 

14 

520.00 

19 

784.00 

5 

48.00 

10 

240.00 

15 

520.00 

20 

855.00 

6 

58.00 

11 

300.00 

16 

520.00 

21 

930.00 

It  is  understood  that  the  average  amount  of  protection  in  force  in  the  Industrial 
companies  in  1904  was  $32.56  on  all  ages  under  ten.  Under  age  15  it  was  $48.90.  At 
age  2,  the  average  was  $13.33,  at  age  3  it  was  $19.10,  at  age  4  it  was  $23.46,  and  at  age 
5  it  was  $27.70. 

From  this  it  appears  that  the  rate  of  premium  is  very  high,  during  these  years, 
$2.60  for  an  average  of  only  $32.56  under  ten  years  and  $48.00  under  fifteen  years. 

In  this  connection  it  may  be  said  that  the  Insurance  Department  of  the  State  of 
New  York  has  made  a  thorough  investigation  of  the  mortality  experience  of  the  Metro- 
politan Company,  from  which  it  has  a  mortality  table  that  is  now  recognized  as  a 
standard  for  such  business,  and  were  these  organizations  to  undertake  the  work  this 
table  could  be  made  the  standard  so  that  there  would  be  no  groping  in  the  dark  as  to 
what  experience  might  reasonably  be  expected.  Mr.  Landis  has  prepared  for  us  and 
we  append  herewith  a  table  showing  the  amount  of  protection  that  $1.00  per  year  will 
buy  contributed  monthly  on  term  to  age  21,  Standard  Industrial  Mortality  Table  and 
four  per  cent  interest. 
Age  next 
Birthday.  Col.  i  Col.  2.  Col.  3. 

2    $109.86  $93.38  $87.89 

3   144.60  122.91  -     1 15.68 

4  179.32  152.42  14346 

5   203.81  173-24  163-05 

6  222.46  189.09  177.97 

7  " 235.70  200.35  188.56 

8  245.25  208.46  196.20 

9  250.12  212.60  200.10 

10  250.06  212.55  200.05 

11   245.26  208.47  196.21 

12  236.64  201.14  189.31 

13  225.38  191.57  180.30 

14  212.81  180.89  170.25 

J5   109.72  169.76  159.78 

16  .187.04  158.98  149.63 


$3,148.05          $2,675.81 


$2,518.44 


103 

Col.  i.  Amount  of  protection  that  $1.00  per  year  will  buy  contributed  monthly 
on  term  Age  21,  with  no  deduction  for  expenses. 

Col.  2.  Amount  of  protection  that  $1.00  per  year  will  buy  contributed  monthly  with 
15  per  cent  used  for  expenses  (85c  per  year  net). 

Col.  3.  Amount  of  protection  that  $1.00  per  year  will  buy  contributed  monthly  with 
20  per  cent  used  for  expenses  (8oc  per  year  net). 

It  will  be  seen  from  what  has  been  said  about  cost  that  with  a  20  per  cent  loading 
for  expenses,  from  2  1-2  to  5  times  as  much  protection  could  be  furnished  for  $1.00  as 
is  now  obtainable.  And  why?  Let  us  answer,  largely  because  we  "could  minimize  the 
cost  of  securing  and  retaining  the  business.  How  could  we  do  this?  Because  we  have 
the  machinery  now  organized,  and  by  limiting  the  benefits  to  small  amounts  as  above 
indicated  is  done  by  the  commercial  companies  in  this  country,  and  this  is  equally  true 
of  the  foreign  companies,  the  annual  premium  would  be  so  small  that  it  could  and 
should  be  paid  in  one  sum,  thus  at  once  practically  doing  away  with  two  of  the  prin- 
cipal causes  of  the  great  expense  incident  to  the  business — collecting  and  office  work. 
Then  again,  this  great  reduction  in  annual  cost  would  be  a  great  inducement  to  our 
members  who  want  such  protection  to  secure  it  in  the  society  where  they  hold  their 
membership,  and  should  materially  reduce  the  cost  of  securing  the  business.  In  short, 
the  only  reason  for  establishing  such  departments  would  be  the  advantage  that  would 
accrue  to  our  members  and  to  our  Orders.  It  would  increase  the  interest  of  the  mem- 
ber in  the  Order,  because  of  the  financial  saving  and  the  convenience  of  handling  it. 
It  would  in  a  way  interest  the  children  in  the  Order,  and  as  they  reached  the  age  when 
they  could  become  members  they  would  be  going  in  the  right  direction. 

From  the  foregoing  our  Committee  concludes  that  this  work  can  be  advantageously 
and  economically  done  by  these  associations. 

That  the  benefits  should  be  limited  to  small  sums — not  over  $40 — on  the  life  of  any 
child  between  one  year  and  five  years  of  age,  and  not  to  exceed  $150  in  any  case. 

That  the  mortality  table  adopted  by  the  State  of  New  York,  above  referred  to, 
should  be  made  the  standard. 

That  it  would  be  advisable  to  require  the  premiums  or  rates  to  be  paid  annually. 
_  That  no^  one  but  members  of  these  Orders  should  be  allowed  to  take  advantage  of 
this   provision,  and  that  in   no   case  should  any  one  but   the  parent  of  the  child  be 
allowed  to  secure  such  benefits,  or  the  guardian  of  the  child  when  death  of  the  parent 
occurs  after  the  issuance  of  the  certificate  in  such  cases. 

That  in  all  cases  the  protection  thus  secured  should  end  on  the  chil',d  becoming 
twenty-one  years  of  age,  and  that  the  protection  thus  afforded  be  called  "INFANTILE 
PROTECTION." 

Before  this  work  can  be  undertaken  by  these  Orders  two  things  are  necessary : 

First.  Legislation  must  be  secured  in  the  different  States  authorizing  it,  and  to 
that  end  provision  should  be  made  in  the  new  Uniform  Bill,  now  under  consideration. 

Second.  Those  Orders  that  want  to  establish  such  branches  or  departments  must 
amend  their  laws  accordingly.  Fraternally  submitted, 

D.  P.  MARKEY,  Chairman. 
W.  E.  ROBINSON, 
F.  FAIRMAN, 
JOHN  T.  YATES, 

Committee. 

Mr.  Markey  also  reads  section  the  Committee  would  suggest  be  made  a  part  of  the 
Uniform  Bill,  as  follows: 

''Section Any  association  authorized  to  do  business  under  this  Act  may  issue 

certificates  upon  the  lives  of  the  children  of  its  members  who  are  not  less  than  one 
year  or  more  than  eighteen  years  of  age.  The  amount  of  protection  to  be  thus  fur- 
nished shall  in  no  case  exceed  the  sum  of  forty  dollars  on  the  life  of  any  child  between 
the  ages  of  one  year  and  five  years,  and  $100  on  the  life  of  any  child  between  the 
ages  of  five  years  and  ten  years,  and  $150  on  the  life  of  any  child  between  the  ages 
of  ten  years  and  eighteen  years.  All  such  certificates  shall  be  issued  for  a  term  of 
years  ending  with  the  attainment  of  the  age  of  twenty-one  by  the  child  upon  whose 
life  the  certificate  is  issued.  No  benefit  thus  provided  shall  be  payable  to  any  other 
person  than  the  parent  of  the  child,  except  in  cases  where  subsequent  to  the  issuance 


104 

of  the  certificate  the  parent  of  the  child  in  whose  favor  the  certificate  is  issued  shall 
have  died,  in  which  event  the  certificate  may  be  payable  to  the  guardian  of  the  child. 

"All  contributions  necessary  to  provide  such  protection  shall  be  based  upon  the 
standard  industrial  mortality  table  adopted  by  the  State  of  New  York,  and  interest  at 
the  rate  of  3  1-2  per  cent  per  annum." 

Mr.  Markey :  Mr.  Landis  wishes  me  to  make  this  statement,  which  is  probably 
just  in  this  connection :  The  actuaries  of  the  Prudential,  Metropolitan  and  John  Han- 
cock supplied  Mr.  Landis  with  many  details  and  much  information,  they  being  informed 
that  the  same  would  be  presented  to  the  National  Fraternal  Congress,  in  which  cir- 
cumstances your  committee  desire  to  acknowledge  obligation  and  express  appreciation 
to  the  officers  of  these  life  companies. 

Mr.  Markey:  I  move  that  the  report  of  the  committee  be  accepted  and  placed  on 
file. 

Motion  seconded  and  carried. 


A  GENERAL  REVIEW. 

Much  space  has  been  given  to  quoting  others,  and  it  now  may  be  pertinent  to 
indulge  some  personal  observations  in  the  way  of  a  general  review. 

Organization  for  mutual  assistance  is  of  great  antiquity  and  wide  distribution. 
Societies  of  this  kind  have  not  always  been  as  sharply  differentiated  as  they  are  to-day. 
In  common  with  other  institutions  they  have  emerged  from  a  comparatively  indefinite 
similarity  to  a  comparatively  definite  heterogeneity,  and  have  doubtless  yet  to  undergo 
further  development. 

The  first  systematic  effort  at  mutual  cooperation  along  altruistic  lines  was  in 
the  formation  of  the  great  trade  guilds  of  the  Midde  Ages.  As  the  guilds  degenerated 
and  gradually  outlived  their  usefulness,  the  need  of  substitute  organizations  became 
apparent.  To  the  recognition  of  this  need  we  may  trace  the  rise  of  the  Friendly 
Societies  of  Great  Britain.  Of  these,  it  will  suffice  to  consider  a  typical  specimen, 
for  which  purpose  I  have  selected  the  largest  and  strongest,  the  Manchester  Unity, 
I.  O.  O.  F. 

This  great  body,  with  a  present  membership  of  over  a  million,  is  composed  of  and 
governed  by  the  laboring  classes.  Local  lodges  exist  in  all  parts  of  the  country  and 
manage  their  own  affairs  in  a  thoroughly  democratic  manner.  They  are  as  inde- 
pendent as  the  New  England  town,  being,  like  the  latter,  subordinate  to  a  central 
body  of  strictly  limited  authority,  to  which  they  send  representatives.  In  the  local 
lodge  itself  one  member  is  as  good  as  another  and  discussion  is  perfectly  free.  The 
officers  of  the  central  governing  body  are  elected  annually,  with  the  exception  of  the 
Secretary,  whose  tenure  is  permanent. 

The  founders  of  the  Unity  failed  to  appreciate  the  nature  or  magnitude  of  the 
financial  problems  involved  in  their  undertaking.  Although  the  plan  of  the  society 
contemplated  the  payment  of  definite  sickness  and  funeral  benefits,  no  attempt  was 
made  to  calculate  adequate  rates  of  contribution.  Aside  from  the  fact  that  such  a 
calculation  would  have  been  impracticable  for  lack  of  a  sufficient  volume  of  reliable 
"data,  its  importance  was  not  recognized. 

There  existed  in  Great  Britain  the  same  feeling  that  we  find  so  prevalent  in  our 
own  country — namely,  that  "Fraternity"  could  be  depended  upon  to  overcome  all  the 
evil  results  of  vicious  business  habits.  That  Fraternity  is  capable  of  accomplishing 
much  can  be  doubted  by  no  careful  observer;  but  the  tendency  to  regard  it  as  a 
panacea  is  sure,  soon  or  late,  to  lead  to  disaster.  This  the  Unity  learned  in  time  by 
the  teachings  of  bitter  experience. 

Organized  in  the  year  1812,  the  Unity  grew  and  flourished  for  several  years,  be- 


105 

cause  its  rates  sufficed  while  the  members  were  all  young  and  mostly  in  good  health. 
In  fact,  many  of  the  lodges  became  burdened  with  accumulated  funds,  of  which  they 
proceeded  to  relieve  themselves  by  exploiting  the  social  virtues.  They  little  realized 
that  these  very  accumulations  formed  their  only  safeguard  for  the  future  when,  on 
account  of  the  increasing  age  and  infirmity  of  their  members,  the  claims  should  be- 
come too  heavy  to  be  easily  satisfied  from  the  proceeds  of  Current  collections. 

After  some  thirty  years  of  this  loose,  improvident  operation,  it  became  abundantly 
manifest  to  some  of  the  more  thoughtful  members  that  the  Unity  had  traveled  far 
on  the  broad  and  pleasant  road  that  leads  to  destruction.  Then  began  an  agitation 
which  threatened  the  very  existence  of  the  society  through  the  secession  of  individuals 
and  entire  lodges,  but  which  resulted  in  a  thorough  investigation  of  its  past  ex- 
perience and  the  formulation  of  adequate  rate  tables  for  future  use.  With  the 
adoption  of  these  tables  in  1854,  the  Unity  opened  a  new  chapter  in  its  history  which 
thenceforth  has  been  an  uninterrupted  record  of  growth  and  prosperity.  One  more 
reform  needed  to  be,  and  was,  instituted  in  the  decade  ending  in  1870,  by  which  year 
quinquennial  valuations  had  become  compulsory. 

The  record  of  the  Unity  demonstrates  that  it  is  quite  within  the  capacity  of  the 
laboring  classes  to  conduct  a  great  business  on  democratic  principles.  It  is  an  object 
lesson  which  justifies  a  most  optimistic  attitude  toward  future  industrial  conditions. 
As  such,  it  has  attracted  the  favorable  attention  of  the  actuaries,  economists,  and 
legislators  of  Great  Britain,  all  of  whom  seem  to  have  recognized  the  fact  that  they 
were  confronted  with  a  phenomenon  of  most  hopeful  import.  It  is  regrettable  that  a 
similar  movement  in  this  country  has  received  far  less  sympathetic  treatment  from 
experts  and  officials.  Some  reasons  for  this  difference  of  attitude  will  be  given 
later. 

In  the  United  States,  prior  to  1868,  there  were  no  organizations  closely  resembling 
the  British  Friendly  Societies.  It  is  true  that  secret  societies,  such  as  the  Freemasons 
and  Odd  Fellows,  and  trade  unions  were  accustomed  to  assist  distressed  members,  but 
such  work  was  more  or  less  incidental  and  not  the  main  object  of  their  existence. 
Furthermore,  the  help  so  extended  partook  of  the  nature  of  charity;  that  i'S,  it  was 
dictated  by  sympathy  or  fraternity  instead  of  by  contract. 

In  1868,  however,  John  J.  Upchurch,  a  Pennsylvania  workingman,  founded  the 
Ancient  Order  of  United  Workmen,  in  the  plan  of  which  mutual  insurance  was 
dominant,  although  the  features  characteristic  of  secret  societies  in  general  were  by 
no  means  ignored.  In  various  centers  in  the  State  were  organized  local,  self-governing 
lodges  which  were  entitled  to  send  delegates  to  the  grand  lodge  at  Meadville,  the 
central  legislative  body,  the  elected  officers  of  which  managed  the  financial  affairs  of 
the  society  and  compelled  obedience  to  the  by-laws  on  the  part  of  the  local  bodies. 
In  fact,  the  grand  lodge,  although  a  representative  assembly,  was  the  real  source  of 
authority,  the  self-government  of  the  local  lodge  being  based  on  sufferance  rather 
than  on  right. 

As  the  society  spread  into  adjacent  States  and  additional  grand  lodges  resulted, 
the  supreme  lodge  was  organized  at  Meadville  in  1871,  for  the  purpose  of  harmonizing 
the  work.  Its  function  is  advisory,  rather  than  authoritative,  the  grand  lodges  having 
declined  to  surrender  their  independence  and  having  reserved  the  right  to  repudiate 
their  allegiance  to  the  supreme  body. 

The  rapid  growth  of  the  Workmen,  indicating  that  it  met  a  popular  want,  of 
course  inspired  imitation,  and  to-day  there  are  in  the  entire  country  upwards  of  three 


106 

hundred  fraternal  beneficiary  societies.  They  all  have  representative  government,  the 
lodge  system  and  ritualistic  ceremonies ;  in  fact,  these  features  are  required  by  the 
statutes  of  most  of  the  States. 

In  respect  of  benefits  offered  and  rates  charged,  they  exhibit  all  the  picturesque 
variety  of  which  the  untrammeled  human  fancy  is  capable. 

That  there  need  be  any  particular  relation  between  the  respective  values  of  the 
benefits  promised  and  of  the  contributions  charged  never  seemed  to  occur  to  the 
founders  of  these  societies. 

In  fact,  all  suggestions  of  that  nature  were  brushed  aside  as  smacking  of  theory 
and,  therefore,  unworthy  of  consideration  by  practical  men  who  had  competition  to 
meet  and  could  guess  just  as  clearly  as  their  rivals. 

In  the  seventies,  a  great  impetus  was  given  to  the  formation  of  fraternal  beneficiary 
societies  by  the  failures  of  old-line  life  companies  and  the  startling  disclosures  as 
to  the  methods  followed  by  some  of  the  most  prominent  among  them. 

To  the  disgruntled  victims  of  old-line  methods,  the  siren  voice  of  the  fraternal 
beneficiary  society  was  sweet  indeed. 

Within  the  sacred  precincts  of  the  lodge  room  they  could  denounce  to  a  sympathetic 
audience  the  "outrageous  treatment"  to  which  they  had  been  subjected  by  a  "soulless 
corporation"  and  could  resolve  to  demonstrate  to  the  world  the  possibility  of  com- 
bining the  business  of  mutual  insurance  with  the  practical  exemplification  of  the 
golden  rule. 

The  idea  was  a  noble  one,  albeit  somewhat  too  elevated  for  present-day  human 
nature  and  insufficiently  enlightened  by  a  knowledge  of  the  cost  of  insurance. 

To  fraternalists  the  mathematical  reserve  on  life  policies  has  always  been  a  more 
or  less  unholy  mystery. 

Having,  in  the  old  tontine  days,  seen  this  accumulation  confiscated  in  the  case  of 
lapsing  members,  it  was  a  natural  inference  that  a  similar  course  was  followed  in 
respect  of  the  dead. 

Obviously  these  millions  of  reserve  bore  a  sinister  aspect  and  represented  an 
unnecessary  burden  on  the  helpless  policy-holder. 

Thus  originated  the  popular  battle  cry  of  "Keep  your  reserve  in  your  pocket." 

For  many  years  the  societies  remained  true  to  their  principles  and  sedulously  avoided 
accumulation,  and  only  with  the  utmost  reluctance  did  they  begin  to  abandon  the 
practice  under  the  irresistible  pressure  of  experience. 

In  the  oldest  societies,  such  as  the  Workmen,  business  principles  were  at  first 
completely  subordinated  to  the  demands  of  fraternity. 

No  discrimination  was  allowed  because  of  age,  occupation,  residence,  or  physical 
condition — all  members  were  on  a  perfect  equality. 

That  such  methods  did  not  wreck  the  society  before  it  was  fairly  launched  is 
conclusive  proof  that  the  fraternal  tie  is  more  than  an  empty  sentiment. 

Slowly,  but  none  the  less  surely,  the  faulty  system  of  the  Workmen  has  been  mended 
until  now  the  supreme  lodge  urges  with  all  the  force  at  its  command  the  adoption 
of  a  plan  prepared  under  the  guidance  of  a  competent  actuary. 

In  other  words,  here,  as  in  Great  Britain,  the  common  people  have  demonstrated 
their  capacity  to  manage  large  enterprises  on  democratic  lines. 

To  one  who  has  the  welfare  of  humanity  at  heart,  few  signs  could  be  more  en- 
couraging. 

Comparatively  few  societies  have  imitated  the  Workmen's  original  example  of  a 
uniform  rate  of  assessment  at  all  ages. 


107 

We  find  the  vast  majority  adopting  the  system  of  rates  graded  to  admission  ages 
and  remaining  level  thereafter.  Within  a  few  years,  a  society  so  operated  would  find 
itself  composed  of  groups,  corresponding  to  entrance  ages,  each  containing  members 
of  various  ages  paying  the  same  rate. 

In  short,  a  compound  Workmen  plan  had  been  substituted  for  the  original  simple 
device,  with  little  or  no  practical  advantage. 

Of  one  society,  the  National  Union,  special  mention  should  be  made,  because  of 
the  fact  that  it  started  on  the  step-rate  principle,  the  rates  being  graded  by  ages  and 
each  member  being  required  to  pay  the  rate  corresponding  to  his  attained  age  on 
January  first  of  each  year.  This  plan  was  defective  because  of  the  fact  that  the  rate 
schedule  stopped  abruptly  at  age  65,  no  adequate  provision  having  been  made  for  mem- 
bers who  should  pass  that  point.  It  is  particularly  gratifying  to  be  able  to  say  that 
this  weakness  has  now  been  overcome  through  the  efforts  and  upon  the  initiative  of 
the  officials  of  that  Society. 

In  course  of  time,  the  older  societies  began  to  experience  difficulties. 

In  spite  of  their  most  strenuous  efforts,  they  found  themselves  compelled  to  levy 
assessments  more  and  more  frequently,  with  the  result  that  they  were  unable  to 
compete  on  equal  terms  with  their  younger  rivals. 

The  latter,  having  learned  something  from  the  experience  of  their  predecessors, 
endeavored  to  prevent  their  own  future-  decay  by  every  fantastic  device  that  the  will 
of  man  could  conceive. 

Some  of  these  were  actually  patented,  which  fact  would  indicate  that  their  inventors 
at  least  believed  them  to  be  effective. 

A  study  of  these  various  schemes  to  secure  the  advantages  of  a  mathematical 
reserve,  without  accumulating  it,  will  convince  any  unprejudiced  mind  that  the  in- 
genuity of  ignorance  is  still  in  active  operation. 

Fortunately,  the  older  societies  do  not  find  these  vagaries  attractive,  but  manifest 
a  tendency  to  readjust  along  scientific  lines,  with  the  assistance  of  expert  advice. 

An  important  distinction  between  the  British  friendly  and  the  American  fraternal 
beneficiary  societies  should  not  be  forgotten. 

The  main  purpose  of  the  former  was  and  is  the  payment  of  sickness  and  funeral 
benefits,  and,  although  some-  of  them  offer  ordinary  life  insurance,  the  maximum  risk 
assumed  on  any  one  life  is  200  pounds.  The  American  societies  are  essentially  mutual 
life  insurance  organizations,  although  some  of  them  pay  limited  sickness  and  accident 
benefits.  The  most  popular  certificates  have  a  face  value  of  $1,000  or  $2,000,  but  not 
infrequently  they  are  written  for  $5,000. 

The  foregoing  distinction  may  help  to  explain  why  in  the  one  country  the  attitude 
of  the  actuaries  is  tolerant  or  sympathetic,  while  in  the  other  it  is  hostile.  Practically 
all  of  these  gentlemen  are,  or  have  been,  connected  with  old-line  companies,  and  have 
thus  become  somewhat  biased,  perhaps  unconsciously. 

The  British  societies  occupy  a  field  of  their  own,  their  competition  with  the  business 
corporations  being  hardly  perceptible. 

The  American  societies,  on  the  other  hand,  are  active  and  most  successful  com- 
petitors of  life  companies. 

Furthermore,  the  founders  of  the  fraternal  societies  provoked  the  experts  by 
sneering  at  them  and  ignoring  their  sometimes  disinterested  advice. 

At  first  glance  the  situation  would  seem  to  be  unfortunate,  but  the  indications 
are  that  it  may  result  in  the  development  of  a  new  generation  of  actuaries,  unfettered 
by  traditions. 


108 

The  fraternal  beneficiary  system  is  now  in  its  forty-sixth  year,  and  its  amazing 
vigor  is  a  source  of  perennial  grief  and  astonishment  to  its  old-line  critics  who  re- 
garded it  at  first  with  the  kind  of  intolerant  contempt  that  Alexieff  used  to  display 
toward  the  Japanese. 

It  seems  impossible  for  men  to  learn  that  there  are  more  things  in  heaven  and 
earth  than  are  dreamed  of  in  their  philosophy. 

I       The  Ancient  Order  of  United  Workmen  which,  by  all  the  rules  of  orthodoxy,  ought 
to  have  perished  years  ago,  has  been  subjected  to  the  fire-test  and  still  lives. 
t    It  is  evident  that  we  are  here  confronted  with  a  phenomenon  that  defies  mathe- 
matical analysis.    The  plans  of  the  fraternal  beneficiary  societies  may  be  simultaneously 
abhorrent  to  mathematics  and  acceptable  to  human  nature. 

The  policy-holders  of  an  old-line  company,  even  though  it  be  the  mutual  variety, 
are  practically  impotent  to  affect  its  management,  being  without  organization  or 
knowledge  of  one  another's  ideas.  As  few  of  them  can  attend  the  annual  meetings, 
they  usually  designate  as  proxies  men  of  whom  they  never  before  heard,  and  of  whose 
opinions  they  are  blissfully  ignorant.  They  feel  and  are  as  helpless  as  the  depositors 
in  a  bank  who  place  their  trust  in  the  honesty  and  sagacity  of  the  officers  and  hope 
for  the  best.  This  is  business,  pure  and  simple,  and  to  it  business  principles  apply 
in  all  strictness.  ~ 

The  members  of  a  fraternal  beneficiary  society  are  organized  in  numerous  local 
lodges,  which  hold  meetings  at  least  once  a  month  and  sometimes  every-  week.  Here 
the  members  become  acquainted  and  here  they  discuss  every  detail  of  their  co- 
operative enterprises.  As  the  time  approaches  for  the  regular  annual  or  periodical 
meeting  of  the  supreme  body,  they  elect  thereto  trusted  representatives,  whom  they 
may  instruct  if  they  so  desire.  There  develops  in  these  members  a  very  active  feeling 
of  proprietorship  in  their  society  and  of  loyalty  to  its  interests.  It  is,  so  to  speak, 
their  child,  and  they  will  endure  no  inconsiderable  sacrifices  to  conserve  its  existence. 
To  such  a  condition,  business  rules  and  principles  are  inadequate,  as  they  ignore  the 
most  vital  feature  of  the  phenomenon. 

That  the  foregoing  is  the  true  explanation  of  the  failure  of  facts  to  verify 
actuarial  predictions  is  indicated  by  another  striking  circumstance. 

About  the  time  that  the  fraternal  beneficiary  movement  originated  there  were 
organized  on  the  same  faulty  plans,  but  with  government  similar  to  that  of  the 
old-line  companies,  a  number  of  assessment  associations.  Although  their  officers  were, 
as  a  rule,  more  keenly  sensitive  than1  those  of  the/  fraternals  to  approaching  dangers, 
yet,  with  a  single  exception,  due  to  peculiar  conditions,  every  one  of  the  original  and 
prominent  associations  has  disappeared  or  has  been  transformed  into  a  legal  reserve 
or  stipulated  premium  company.  As  Carlyle  would  have  said,  "This  is  significant  of 
much." 

As  a  direct  result  of  the  lodge  system,  the  societies  minimize  the  expense  of  field 
work.  A  comparison  of  the  respective  costs  of  management  of  the  business  com- 
panies and  the  fraternals  is  highly  enlightening. 

If  it  be  argued  that  lodge  dues  have  been  ignored  in  the  comparison,  the  answer 
is  that  their  main  object  is  to  pay  for  fraternal  features  for  which  there  is  no 
counterpart  in  an  old-line  company.  Nor  are  these  features  imaginary.  We  find  them 
sufficiently  powerful  to  hold  together  vast  societies  like  the  Masons  and  Odd 
Fellows,  which  do  not  pretend  to  conduct  an  insurance  business.  Millions  have  been 
paid  by  the  local  lodges  for  the  relief  of  members  who  were  sick,  injured,  or  out 
of  employment.  Other  millions  have  been  expended  in  social  entertainment,  which  is 
a  feature  not  to  be  overlooked  when  estimating  what  has  been  accomplished  by  these 


109 

bodies.  I  have  noted,  in  many  publications,  slurs  cast  at  this  latter  kind  of  ex- 
penditure. Those  who  belittle  the  social  feature  evince  ignorance  of  one  of  the 
strongest  points  in  favor  of  mutual  insurance  under  the  lodge  system. 

Life  insurance,  per  se,  is  taken  and  carried  for  the  protection  o>f  dependants. 
No  benefit  is  realized  until  the  death  of  the  insured,  and,  consequently,  he  who  carries 
and  pays  for  the  insurance  has  no  other  satisfaction  from  it  than  that  derived  from 
the  consciousness  that  he  has  provided  for  loved  ones  in  the  event  of  his  death. 
Of  itself,  such  a  performance  indicates  a  high  and  noble  purpose. 

Man  owes  a  duty  to  himself,  and  when  this  can  be  combined  with  that  owed  to 
his  family,  much  has  been  accomplished  toward  the  consummation  of  a  perfect  system 
of  social  organization.  The  lodge  meetings  not  only  provide  the  ordinary  pleasures 
of  social  intercourse,  but  under  the  influence  of  the  teachings  of  the  ritual,  they 
are  an  inspiration  to  higher  ideals,  and  beget  the  altruism  that  turns  the  mind  out- 
ward and  makes  men  wish  to  live  for  others  beside  their  own  immediate  families. 

This  social  feature  of  the  fraternities  has  saved  thousands  from  drunkenness  and" 
other  forms  of  dissipation  into  which  they  otherwise  would  have  plunged  in  their 
blind  quest  of  pleasure. 

Many  of  these  societies  accept  members  of  both  sexes,  and  most  of  them  absolutely 
bar  alcoholic  liquors  from  their  lodge  rooms. 

The  combination  of  life  insurance  operation  along  with  fraternal  and  social  rela- 
tions is  one  that  appeals  to  reason  and  sentiment  and  tends  to  popularize  co- 
operative effort  for  mutual  protection. 

The  life  companies  have  recognized  this  fact  and  have  undertaken  to  minimize  its 
effect  by  representing  that  they  sold  policies  under  which  the  insured  did  not  "have  to 
die  to  win." 

An  important  difference  between  the  old-line  and  fraternal  systems  is  in  respect 
of  elasticity. 

The  life  company  is  rigid,  the  contract  being  definite  as  to  both  benefits  and  con- 
tributions. For  the  sake  of  safety,  the  company  is,  consequently,  obliged  to  over- 
charge. 

In  the  fraternals  the  amount  that  a  member  will  be  required  to  pay  from  year  to 
year  is  seldom  entirely  definite. 

His  assessment  rate  may  be  established  in  the  by-laws,  but  almost  invariably  these 
are  subject  to  amendment  by  the  supreme  legislative  body. 

Furthermore,  it  is  not  unusual  to  find  a  provision  whereby  no  claim  can  exceed  the 
proceeds  of  one  assessment  on  the  entire  membership. 

As  the  provision  for  expense  of  management  is  generally  quite  definite,  there  re- 
sults not  only  the  ability  to  collect  each  year  the  exact  cost  of  protection,  but  a 
most  effectual  discouragement  of  extravagance. 

The  members  have  never  shown  a  disposition  to  endorse  the  doctrine  that  the 
services  of  some  men  are  worth  from  fifty  to  a  hundred  times  as  much  as  those 
of  the  average  citizen,  and,  as  a  consequence,  salaries  above  $5,ooo  are  rare.  Strange 
as  it  may  seem  to  those  conversant  with  old-line  conditions,  capable  officers  are 
secured  without  difficulty,  in  spite  of  the  uncertain  tenure  of  their  position.  The 
wisest  selections  may  not  always  be  made,  but,  on  the  other  hand,  the  unfit  do  not 
survive. 

Democratic  government  naturally  involves  politics,  and  from  the  latter  it  must  be 
confessed  that  the  fraternals  are  not  exempt.  That  this  circumstance  is  to  their 
detriment  is  by  no  means  certain.  Political  aspirations  are  distinctly  honorable  when 
not  tainted  with  graft.  From  suspicion  of  graft,  the  administration  of  the  societies 


1 10 

has  been  singularly  free.  Although  large  sums  of  money  have  been  handled,  the 
losses  that  have  occurred  have  been  due  almost  exclusively  to  faulty  judgment.  Even 
such  losses  have  been  inconsiderable.  In  fact,  in  respect  of  both  honesty  and 
economy  of  management,  the  fraternals  can  well  stand  the  test  of  comparison  with 
old-line  companies. 

Although  enough  has  been  said  to  indicate  that  the  fraternal  beneficiary  system  is 
in  harmony  with  existing  conditions  in  the  United  States,  it  will  be  useful  to  in- 
vestigate its  prospect  of  permanence. 

In  the  first  place,  let  it  be  premised  that  the  failure  of  individual  societies  proves 
nothing  against  the  principle  upon  which  they  were  founded  if  other  adequate  causes 
are  known  to  exist.  The  whole  movement  is  still  in  the  experimental  stage,  for  which 
reason  alone  uninterrupted  success  would  be  little  short  of  miraculous. 

Representative  government  has  not  in  every  instance  proved  equal  to  the  tasks 
imposed  upon  it,  but  it  has  shown  an  ability  to  profit  by  experience. 

With  few  exceptions,  the  recent  history  of  the  societies  under  consideration  has 
been  most  encouraging.  There  is  every  indication  that-  the  great  majority  of  them 
will,  through  their  own  efforts  and  without  compulsion,  so  reform  their  faulty  plans 
as  to  assure  their  financial  stability. 

They  enjoy  the  advantages  of  representative  government  and  have  demonstrated 
their  ability  ^o  modify  their  plans  when  the  latter  have  proven  unsatisfactory. 

They  are  attempting  to  provide  cheap  protection  for  their  families  and  they 
are  accomplishing  their  design,  not  perfectly  it  is  true,  but  with  really  amazing 
success. 

A  single  one  of  these  societies  has  since  its  organization  paid  in  death  claims  not 
less  than  $225,000,000.  This  enormous  sum  of  money  has  gone  to  the  widows  and 
orphans  of  men  who  would  have  carried  far  less  insurance  or  none  at  all  had  it  not 
been  for  the  existence  of  the  fraternals. 

Popular  government  has  been  sufficiently  tested  to  justify  my  belief  that  the 
fraternal  orders  will  not  fail,  in  the  long  run,  if  let  alone. 

They  can  be  killed,  doubtless,  and  against  this  danger  the  only  safeguard  is  eternal 
vigilance. 

Their  success,  as  I  have  already  intimated,  means  much  to  the  cause  of  humanity. 

No  thoughtful  observer  can  regard  our  present  industrial  regime  as  final.  With 
its  remittent  warfare  between  capital  and  labor,  it  is  obviously  a  temporary  condition. 
By  what  is  it  to  be  succeeded? 

Shall  it  be  the  deadly  stagnation  of  socialism,  or  shall  opportunity  be  left  for  the 
development  of  individualism  which  has  played  so  prominent  a  part  in  the  history  of 
the  human  race? 

Perhaps,  if  the  great  business  of  life  insurance  can  be  successfully  conducted  on 
democratic  principles,  the  outlines  of  the  answer  may  become  discernible. 

Possibly  capitalists,  as  a  distinct  class,  may  become  as  unnecessary  as  an  hereditary 
aristocracy. 

One  may  be  permitted  to  indulge  the  dream  that  some  day  capitalist  and  laborer 
may  be  combined  in  the  same  person,  and  that  great  industries  may  be  competently 
managed  by  officers  elected  by  the  whole  body  of  the  workers  There  is  nothing  in- 
credible in  the  supposition,  which  is,  on  the  contrary,  in  line  with  the  course  of  human 
evolution.  Such  a  condition  would  allow  free  play  to  individual  ambition  and  tend 
to  abolish  strikes  and  the  existing  abnormal  contrasts  of  wealth  and  social  position. 

Since  reforms  are  inaugurated  by  movement  of  the  masses,  and  since  five  millions 
of  the  wage-earners  and  breadwinners  in  the  United  States  and  ten  millions  in 


1 1 1 

Great  Britain  are  taking  lessors  in  economical  science  froni  the  best  of  a1!  teachers, 
Experience,  is  it  beyond  reason  to  anticipate  development  of  the  mutual  and  co- 
operative principle  underlying  fraternal  society  management  in  the  business  relations 
between  producers  and  consumers,  the  great  majority  of  whom  are  the  wage-earners 
and  breadwinners  of  the  country? 

To  be  more  definite,  let  me  call  attention  to  the  fact  that  the  insurers  and  the 
insured  are  the  same  persons  in  a  fraternal  beneficiary  society. 

The  officials  and  managers  are  strictly  and  truly  the  agents  of  the  members  from 
whom  the  contributions  are  collected  and  to  the  beneficiaries  for  whom  they  are 
distributed. 

No  capitalist  stands  between  the  contributing  members  and  the  dependants  of 
deceased  members. 

Only  a  central  office,  with  competent  agents  in  charge,  is  needed  for  the  collection 
of  millions  from  the  many,  and  the  distribution  of  the  same  in  the  payment  of 
promised  benefits. 

Why  is  it  not  possible  to  extend  this  principle  of  mutual  cooperation,  and 
entirely  eliminate  the  capitalist  and  forever  be  rid  of  his  exploitation  of  labor  with 
its  attendants  of  fricton  and  ferment? 

Will  not  the  masses,  some  day,  learn  the  general  application  of  this  principle? 

The  fraternal  beneficiary  system  has  a  profound  significance;  it  is  symptomatic  of 
the  times,  and  what  it  needs  is  intelligent  direction  with  a  minimum  of  State  in- 
terference. 

Any  institution  that  has  distributed  to  widows  and  orphans,  within  four  decades, 
the  enormous  sum  of  more  than  seventeen  hundred  millions  of  dollars,  $100,000,000  of 
which  was  paid  out  in  1913,  is  certainly  entited  to  serious  consideration  by  those  who 
make  a  study  of  political  and  social  science. 

Two  hundred  of  the  existing  societies  have  promised  to  pay  death  benefits  amount- 
ing to  more  than  nine  thousand  millions  of  dollars.  The  ability  to  fulfill  their  promises 
means  much  in  .more  than  four  million  of  American  homes.  Penury,  misery,  and 
crime  will  result  from  inability  to  carry  out  their  contracts  of  insurance. 


READJUSTMENTS. 

Readjustments  have  been  necessary  under  all  systems  of  life  insurance. 

There  could  have  been  no  development  nor  improvement  without  readjustments. 

In  the  early  forms  of  life  insurance  there  were  no  definite  promises  in  the  way  of 
benefits  or  contributions. 

It  has  been  a  wonderful  evolution  from  the  "box,"  nailed  to  the  wall  of  a  public 
house  from  which  charity  pittances  were  dispensed,  to  the  treasuries  containing  bil- 
lions for  the  protection  of  widows  and  orphans  and  the  relief  of  the  disabled  and  the 
aged. 

"Dreams  in  their  development  have  breath,  and  tears,  and  tortures,  and  the  touch 
of  joy;"  and  not  dissimilar  has  life  insurance,  in  its  growth  and  progress,  its  reverses, 
its  trials,  its  failures  and  its  final  success. 

Many  pages  have  been  given  to  the  history  of  life  insurance  organizations  and 
their  fanciful  undertakings  and  their  material  accomplishments.  The  attainment  of 
the  goal  of  perfection  is  yet  to  be  recorded. 

In  the  making  for  the  ultimate  end,  original  plans  many  times  have  been  changed 
by  the  organizations  which  have  survived  the  ordeal  of  conversion. 


112 

In  so  far  as  financial  solvency]  is  concerned  the  life  companies  have  gone  ahead  of 
the  fraternal  beneficiary  societies ;  under  the  whip,  however,  of  State  compulsion. 

Statutory  standards  were  set  and  the  life  companies  were  compelled  to  measure 
up  to  them  or  go  into  the  hands  of  receivers. 

Mortality  demands  forced  changes  in  the  plans  and  rates  of  fraternal  beneficiary 
societies.  No  legislative  enactment  prescribed  the  test  of  adequacy  nor  fixed  any 
standards  as  guides  to  financial  solvency.  In  these  circumstances  there  has  been 
resort  to  every  conceivable  expedient  to  avoid  the  adoption  of  the  simple,  direct 
method  of  requiring  contributions  to  provide  for  the  promised  benefits. 

Legislation  and  regulation  placed  life  companies  in  a  sound  financial  position,  or 
put  them  out  of  business.  The  results  of  legislation  and  regulation  applied  to  fra- 
ternal beneficiary  societies  will  not  be  different. 

Situations  in  Great  Britain  and  in  America  have  been  identical  in  respect  of  fra- 
ternal societies  and  their  adoption  of  makeshifts  rather  than  substantial  reforms  in 
their  efforts  to  thwart  the  operation  of  natural  law. 

In  both  countries  inadequate  contributions  for  the  benefits  promised  have  been 
characteristic  of  fraternal  and  friendly  societies,  and  the  universal  practice  has  been 
to  favor  the  older  at  the  expense  of  the  younger  members. 

When  the  discrimination  is  disclosed  to  the  younger  members,  and  when  it  is  pro- 
posed to  require  the  older  members  to  contribute  in  proportion  to  their  equitable 
share  in  the  losses,  the  former  join  the  latter  in  denouncing  such  a  proposition  as  "un- 
fraternal"  and  no  more  nor  less  than  a  scheme  to  freeze  out  the  old  man. 

Because  it  has  been  impossible  to  overcome  this  sentiment,  I  have  been  a  party 
many  times  to  the  apportionment  of  accumulated  funds  to  the  use  of  those  who  had 
contributed  nothing  towards  the  accumulation.  I  have  always  stated  the  fact  of  ap- 
propriating what  belonged  to  one  for  the  advantage  of  another,  but  that  other  being 
an  aged  brother  justified  the  act  to  those  making  the  sacrifices. 

It  seems  never  to  occur  to  those  who  insist  upon  such  apportionments,  that  all 
who  are  old  are  not  indigent  and  in  need  of  being  assisted  in  the  payment  for  their 
insurance  protection ;  that  the  young  have  most  dependants  and  many  times  are  sorely 
pressed  to  make  their  monthly  contributions. 

These  things  I  have  urged  to  no  avail,  and  to  accomplish  results  I  have  ap- 
portioned funds  as  stated.  I  have  never  had  a  law  suit  over  such  an  apportionment, 
whereas  when  rules  of  equity  entered  into  the  division  of  funds,  in  every  instance, 
save  one,  a  petition  has  been  filed  praying  for  an  injunction  against  it. 

The  first  notable  change  from  original  to  new  plans  was  that  of  the  Ancient  Order 
of  United  Workmen  in  1895,  when  the  "Classified  Plan"  was  adopted  and  the  "Equal 
Levy  Plan"  abandoned — in  so  far  as  these  things  could  be  accomplished  by  the  Su- 
preme Lodge.  As  a  matter  of  fact,  only  such  Grand  Lodges  as  were  in  financial 
straits  adopted  the  "classified"  or  so-called  "step-rate"  plan.  The  others  for  some 
time  continued  to  levy  $1.00  assessments  on  all  members,  regardless  of  age,  whenever 
assessments  were  needed. 

The  "Classified  Plan"  placed  the  membership  in  age-groups.  Those  who  were 
18-24  paid  at  the  rate  for  that  group  to  'age  25,  then  they  paid  an  increased  rate  for 
five  years  until  they  attained  30  years  of  age.  The  advance  continued  to  55  years 
of  age,  when  the  rate  per  $1,000  at  each  assessment  was  $1.92  for  the  remainder  of 
life.  All  members  55  years  of  age  and  older  at  the  time  of  readjustment  were  given 
the  level,  whole  life  rate  of  $1.92  each  assessment  per  $1,000. 


113 

When  I  ventured  the  opinion  that  the  "Classified  Plan"  was  unscientific,  unstable, 
and  inadequate,  in  that  it  would  fail  to  provide  for  the  protection  at  ages  older  than 
55,  I  was  severely  denounced  by  A.  O.  U.  W.  officials  as  an  enemy  to  the  fraternal 
system  and  altogether  an  undesirable  person  in  the  camp  of  fraternal  beneficiary 
societies. 

In  1903  the  Supreme  Lodge  of  the  Ancient  Order  of  United  Workmen  officially 
recognized  the  inadequacy  of  the  "Gasified  Plan"  and  adopted  for  itself  and  re- 
quired Grand  Lodges  to  adopt  adequate,  level  and  uniform  rates  graded  to  ages  of 
entry,  and  applied  at  attained  ages  of  existing  members  younger  than  a  designated 
age.  This  limitation  ir  their  application  created  deficiencies  too  great  for  the  con- 
tributions and  funds.  In  consequence  subsequent  readjustments  were  necessary. 

With  few  exceptions  every  readjustment  of  contribution  rates  by  fraternal  ben- 
eficiary societies  has  favored  the  older  members  by  rerating  as  of  ages  of  entry,  or  by 
applying  the  rates  as  of  attained  ages  younger  than  49,  55,  60,  65,  or  70  years  of  age. 

Seldom  have  the  funds  in  hand  at  the  date  of  readjustment  been  equal  to  the 
present  value  of  the  deficiencies  created  by  granting  to  members  contribution  rates 
lower  than  required  at  their  attained  ages. 

However,  in  many  instances,  careful  calculations  have  been  made  in  the  effort  to 
limit  the  deficiencies  to  such  an  amount  in  present  worth  that  it  would  not  exceed 
the  estimated  present  value  of  future  gains  and  savings. 

Some  of  these  estimates  are  being  realized  in  practical  operation. 

Others  have  not  been  realized,  largely  due  to  heavy  withdrawals,  adverse  mor- 
tality experience  and  failure  to  introduce  new  members  in  numbers  sufficient  to 
neutralize  the  bad  effects  resulting  from  the  change. 

It  appears  to  have  made  little  difference  in  resulting  dissatisfaction  and  disruption 
whether  or  not  large,  or  small,  or  no  concessions  were  made  to  the  older  members. 

The  mere  fact  of  change  in  contribution  rates  created  disturbances,  withdrawals 
and  adverse  selection. 

In  the  readjustment  of  the  Knights  of  the  Maccabees  of  the  World  in  1904  and 
that  of  the  Royal  Arcanum  in  1906,  there  were  no  increases  of  rates  at  ages  younger 
than  55  and  65  respectively,  so  that  the  readjustments  only  immediately  affected  mem- 
bers older  than  those  ages,  yet  the  Maccabees  lost  upwards  of  40,000  and  the  Royal 
Arcanum  a  somewhat  larger  number  of  members  at  the  younger  ages. 

The  older  members  received  great  favor  and  in  return  complained  and  criticised 
and  protested  and  indulged  in  bitter  denunciation  and  instigated  litigation  and  hesi- 
tated at  nothing  that  would  embarrass  the  management  and — remained  in  the  So- 
cieties. 

The  younger  members,  alarmed  or  disgusted,  quit. 

The  action  of  the  older  members  has  been  to  their  own  disadvantage.  By  encour- 
aging the  young  to  withdraw,  or  in  assuming  an  unfriendly  attitude  to  incite  them 
to  withdraw,  the  older  members  lose  the  obvious  advantages  from  association  and 
cooperation  with  the  young. 

Had  they  been  appreciative  of  the  shifting  of  much  of  their  burdens  to  other 
shoulders,  and  had  they  loyally  helped  to  retain  the  young  and  assisted  in  securing 
new  members,  the  deficiencies  created  by  granting  to  them  favors  could  have  been 
overcome  by  the  estimated  gains  and  savings  incident  to  cohesive  mutual  cooperation 
and  an  increasing  membership. 

Wherever — and  there  are  a  number  of  such  cases — the  members  have  acquiesced 
in  a  rerating  and  have  supported  the  management  in  its  effort  to  increase  the  busi- 


114 

ness,  no  readjustment  has  failed  because  of  deficiencies  due  to  favors  to  old  members 
where  such  deficiencies  were  within  the  estimates  of  the  consulting  actuaries. 

Many  makeshift  readjustments  have  been  made  on  the  initiative  of  members  or 
their  representatives  contrary  to  the  advice  of  actuaries  and,  though  accepted  by  mem- 
bers, have  proved  a  failure. 

It  will  be  noted  that  I  have  referred  only  to  changes  in  contributions  under  the 
mention  of  readjustments. 

However,  one  amongst  the  first  readjustments  (in  1898)  was  that  of  the  American 
Legion  of  Honor,  where  the  main  feature  consisted  in  reducing  $5,000  certificates  to 
$2,000.  This  was  successfully  resisted  in  the  courts,  and  only  with  the  consent  of  mem- 
bers, or  in  optional  form,  has  it  since  been  attempted  to  reduce  benefits. 

In  Great  Britain  the  reduction  in  benefits  has  more  often  been  adopted,  under  the 
advice  of  actuaries,  than  to  increase  the  contribution  rates.  The  Actuaries  for  the 
Manchester  Unity  make  the  following  interesting  comments  on  the  different  methods 
of  readjustment  and  their  effect: 

It  may  be  assumed  that  the  deficiency  is  due  to  original  unsoundness  of  principles, 
and  that  it  has  been  accumulating  for  many  years.  Actuarily  a  reduction  of  benefits 
would  be  advised  in  such  a  case,  but  having  regard  to  the  preference  for  increase  of 
contributions  which  is  frequently  disclosed,  it  is  proposed  to  show  the  effect  of  all 
the  measures  that  may  be  regarded  as  either  practically  or  theoretically  possible.  As- 
suming that  the  whole  of  the  deficiency  is  to  be  removed  these  measures  may  be  stated 
as  follows: — 

(a)     Reduction  of  the  sick  benefits  to  io/-  per  week  for  26  weeks ;  s/-  per  week 
afterwards. 

O)     Reduction  of  the  sick  benefits  to  I2/-  per  week  for  26  weeks;  6/-  per  week 
for  26  weeks ;  3/8  per  week  afterwards. 

(c)  Division   of  the   deficiency  amongst  the  members  pro   rota  to  length  of 

membership,  and  conversion  of  the  amount  debited  to  each  member  into 
its  equivalent  annual  contribution. 

(d)  Division  of  the  deficiency  amongst  the  members  in  equal  sums  and  con- 

version  of  the   amounted   debited   to   each   member   into  its   equivalent 
annual  contribution. 

O)     Increase  of  the  contributions  by  an  equal  sum  per  member  without  regard 
to  duration  of  membership  or  age. 

Each  of  these  measures  will  have  a  definite  and  ascertainable  effect  in  money  value 
upon  the  contract  into  which  the  society  has  entered  with  each  member.  In  order  to 
contrast  these  values  it  is  convenient  to  set  them  out  at  each  age  in  parallel  columns ; 
this  is  done  in  the  following  statement : — 

CASH  VALUE  OF  DEFICIENCY  DEBITED  TO  EACH  MEMBER  BY 
AGE.  Method.  Method.  Method.  Method.  Method. 


( 

a) 

( 

V 

(<0 

(rf) 

( 

f) 

£ 

s. 

i 

s. 

i 

s. 

i   s 

£ 

S. 

20 

3 

•17 

2 

14 

Nil 

5 

6 

IO 

30 

4 

9 

3 

14 

3 

2 

5 

5 

16 

40 

5 

5 

5 

2 

6 

3 

5 

4 

18 

50 

6 

4 

7 

O 

9 

4 

5 

3 

19 

60 

7 

6 

9 

14 

12 

6 

5 

2 

16 

70 

8 

4 

13 

O 

15 

8 

5 

I 

16 

Before  considering  these  figures  it  will  be  convenient  to  show  the  equivalent  annual 


115 

contributions  to  the  cash  shares  of  deficiency  debited  in  effect  to  each  member  by 
methods  (c),  (d)  and  (e}.    These  are  as  follows: — 

AGE.  Method.  Method.          Method. 

(O  (rf)  (e) 

£      s      d  s      d  s      d 

20  Nil  44  57 

30  030  4     10  57 

40  070  58  57 

50  o    13      o  72  57 

60  i      3     10  9    10  57 

70  257  15      o  57 

Dealing  first  with  the  cases  of  increase  of  contributions,  it  will  be  agreed  that  in 
principal,  method  (c)  is,  of  the  five  plans,  the  most  equitable,  but  on  referring  to  the 
statement  of  equivalent  contributions  it  is  seen  that  the  amounts  under  this  method 
increase  rapidly  with  age  and  result  at  the  age  of  60  in  more  than  doubling1  the  con- 
tribution hitherto  paid,  and  at  the  age  of  70  in  the  increase  of  such  contribution  by  £2 
5s.  7d.,  /.  e.,  from  19/6  per  annum  to  £3  5s.  id.  Such  a  method,  however  desirable  in 
theory,  is  therefore  wholly  impossible  of  practical  application.  Method  (d)  is  less 
equitable  theoretically,  and  practically  is  also  excluded  by  the  large  increase  of  con- 
tributions at  the  old  ages  which  it  necessitates.  Method  (e) — uniform  increase  of  con- 
tributions— is  the  system  generally  preferred  by  friendly  societies,  but  it  will  be  seen 
to  be  the  most  inequitable  of  all  the  possible  plans,  as  it  places  the  maximum,  charge 
upon  the  youngest  members  who  by  hypothesis  have  created  no  part  of  the  deficiency, 
and  debits  the  minimum  liability  to  the  oldest  members  who  are  responsible  pro- 
portionately for  the  existence  of  the  greatest  part  of  the  deficiency. 

Reverting  to  the  alternatives  of  reduction  of  sick  pay,  it  will  be  seen  that  method 
(a) — reduction  of  all  benefit  by  one-sixth — whilst  inequitable  so  far  as  it  places  some 
part  of  the  deficiency  on  the  younger  members,  does,  at  any  rate,  act  in  the  direction 
of  equity  by  debiting  a  minimum  sum,  to  the  youngest  and  a)  constantly  increasing 
charge  (up  to  the  age  of  70)  on  the  older  members.  Method  (fr)  is  still  less  inequi- 
table both  in  its  effect  upon  the  younger  members  and  as  giving  a  charge  at  the  higher 
ages  approximating  to  that  presented  by  method  (c),  which  as  above  suggested,  may  be 
regarded  as  the  theoretical  ideal. 

From  these  examples  it  is  clear  that  the  reduction  of  benefits  will  operate  more 
equitably,  in  general,  than  the  increase  of  contributions  on  any  scale  that  would  be  re- 
garded as  practicable,  and  if  the  reduction  of  benefits  be  advised  in  the  valuation  re- 
ports it  will  be  wiser  of  lodges  to  accept  that  course,  and  if  need  be  to  give  young  mem- 
bers the  opportunity  of  effecting  new  assurances,  according  to  present  ages,  of  such 
additional  benefits  as  will  bring  the  amounts  up  to  the  original  scale,  than  to  repudiate 
the  actuarial  recommendation  and  to  substitute  some  uniform  increase  of  contribu- 
tions in  which  no  regard  is  paid  to  the  relative  values  of  the  burdens  respectively  placed 
upon  young  and  old  members. 

Sufficient  has  been  written  to  show  that  the  favorite  method  of  uniform  increase 
of  contributions  is,  of  all  practicable  plans  of  dealing  with  deficiencies  the  most  in- 
equitable in  operation.  It  remains  to  be  shown  that  it  is  the  least  effective.  The  cal- 
culations have  proceeded  so  far  upon  the  assumption  that  all  members  remain  in  the 
assumed  society,  and  accept  the  sacrifices  imposed  upon  them,  but  the  position  should 
also  be  examined  on  the  assumption  that  (a  very  general  consequence  of  reforms)  the 
young  members  refuse  to  agree  to  the  changes  and  withdraw.  At  the  youngest  age  the 
full  benefits  and  contributions  are  of  practically  equal  value,  and  any  change  in  either 
the  one  or  the  other  sets  up  "negative  values,"  which  are  immediately  lost  on  the  with- 
drawal of  the  members  concerned.  If,  therefore,  it  be  assumed  that  the  30  members 
taken  as  at  the  age  of  20  withdraw,  the  deficiency  is  partially  restored  by  all  methods 
except  (c).  Such  restored  deficiency  with  the  corresponding  proportion  of  assets  to 
liabilities  is  as  follows: — 

(a)  Deficiency,  £109;  percentage  of  assets  to  liabilities,  95. 
(6)  Deficiency,  £  70;  percentage  of  assets  to  liabilities,  97. 
(c)  Deficiency,  Nil  ;  percentage  of  assets  to  liabilities,  100. 


116 

(rf)  Deficiency,  £153;  percentage  of  assets  to  liabilities,    94. 
(e)  Deficiency,  £193;  percentage  of  assets  to  liabilities,    92. 

Whilst  method  (c}  alone  would  leave  the  position  unaffected,  the  adoption  of 
method  (e),  embodying  the  equal  increase  of  contributions  would  be  followed  by  the 
re-appearance  of  over  one-third  of  the  original  deficiency  and  the  decline  of  the  assets 
to  92  per  cent  of  the  liabilities.  The  results  produced  by  such  method  would  conse- 
quently fall  seriously  short  of  those  intended,  and  the  necessity  for  a  further  adjust- 
ment  at  a  very  early  date  would  be  set  up.  When  the  second  adjustment  came  to 
be  made  it  would  be  found  the  more  difficult  of  application  because  the  society  would 
have  lost  all  its  youngest  members  and  would  have  to  impose  an  entirely  undeserved 
burden  upon  the  younger  of  those  remaining. 

It  may  be  suggested  to  us  that  the  withdrawals  resulting  from  the  adoption  of  re- 
formative measures  are  not  confined  to  young  members,  and  that  the  profits  from  seces- 
sions at  the  more  advanced  ages  will  be  sufficient  to  counterbalance  the  losses  sus- 
tained by  the  lapse  of  youthful  contributors.  In  some  cases,  and  to  some  extent,  this 
may  be  the  experience;  but,  as  we  explain  elsewhere,  the  members  of  advanced  age 
who  withdraw  are  very  frequently  persons  of  superior  health  or  financially  independent 
of  the  sick  pay,  and  the  result  of  their  defection  is  to  lessen  the  contribution  income 
whilst  leaving  the  volume  of  claims  virtually  unaffected ;  an  apparent  immediate  profit 
being  thus  neutralized  by  a  subsequent  increase  in  the  rate  of  sickness  amongst  the 
members  remaining.  The  expectancy  of  profit  from  this  soured  is,  therefore,  in  great 
measure,  illusory  and  little  weight  should  be  given  to  it. 

As  a  final  experiment  we  have  assumed  that  no  measures  are  taken  for  the  rectifi- 
cation of  the  position  and  that  the  society  maintains  the  present  financial  arrangements 
until  the  funds  are  exhausted  and  it  breaks  up.  We  have  ascertained  what  is  the 
present  equivalent  of  the  average  financial  loss  sustained  by  those  members  who  will 
be  surviving  'at  that  date,  which  we  find  to  be  35  years  distant ;  and  when,  therefore, 
the  youngest  member  will  be  aged  55.  For  greater  clearness  we  have  assumed  that  no 
new  members  will  be  admitted.  This  assumption  in  no  way  lessens  the  value  of  the  ex- 
periment, for  whilst  new  members  accepted  on  contribution  terms  that  are  adequate 
as  regards  their  own  benefits  may  prolong  the  life1  of  a  society  in  deficiency  they  cannot 
perpetuate  it.  Collapse  is  inevitable  if  no  reformatwe  measures  are  taken,  and  it  is 
merely  a  question  as  to  which  particular  members  are  to  be  the  victims. 

It  is  found,  then,  in  the  event  supposed  that  the  funds  are  exhausted  after  35  years, 
at  which  period  the  total  number  of  members  surviving  will  be  43.  On  ascertaining 
the  average  amount  of  funds  that  ought  to  be  in  possession  at  that  date  in  respect  of 
each  member,  and  allowing  for  interest  from  the  present  up  to  that  time,  the  follow- 
ing represents  thei  loss  per  member  sustained,  this  being  exhibited!  according  to  the 
present  number  and  ages  of  the  members. 

Present  Value  of  Average  Loss 
per  member  (for  all  members  now 

Present  existing)  by  exhaustion  of  fund 

Age.  after  35  years 

£         s  d 

20 ; 8  10  O 

30 i 8        16        10 

40 4        19         o 

50 o        14 

60 Nil 

70 , Nil 

Thus  the  greatest  loss  falls  upon  the  youngest  members — those  now  aged  20  and 
30 — whilst  in  the  case  of  the  present  old  members,  whose  lifetime  the  Society  will  last 
out,  the  loss  is  nil.  The  effect,  on  the  average,  of  repudiating  reform  in  such  a  case 
may  be  described  as  taxing  a  man  of  20  to  the  extent  of  £8  los.  od.,  having  already 
charged  him  the  full  contribution  for  his  benefits,  whilst  putting  no  tax  whatever  on 
the  man  of  70  to  whose  original  shortcomings  (with  those  of  his  deceased  contempora- 
ries) the  deficiency  is  attributable. 

It  will  be  noted  that  in  the  above  table  the  average  loss  per  member  existing  at 
each  present  age  is  given.  Whilst  all  surviving  will  be  too  old  to  join  another  society 


117 

35  years  hence,  and  in  that  sense  will  suffer  positive  loss,  the  members  most  affected 
by  the  collapse  of  the  society  will  be  those  whose  deteriorated  condition  of  health,  or 
perhaps  actual  invalidism,  will  have  made  them  prospective  claimants  of  large  amounts. 
It  is  clearly  impossible  to  gauge  the  full  extent  of  the  injury  sustained  in  such  cases, 
and  as  no  young  member  can  foresee  whether  he  personally  will  be  so  situated  many 
years  hence  as  to  need  the  constant  help  of  his  society,  it  should  be  realized  by  each 
one  that  whilst  the  average  loss  is  serious  there  is  a  probability  that  the  loss  to  him 
individually  may  be  far  in  excess  of  that  average. 

I  desire  to  direct  particular  attention  to  the  concluding  paragraphs. 

Court  decisions  in  this  country  prevent  a  readjustment  by  reduction  of  benefits, 
unless  with  written  consent  of  the  insured,  nevertheless  the  Messrs.  Watson  clearly 
demonstrate  that  greater  equity  can  be  obtained  by  reducing  benefits  than  by  increasing 
contributions. 

The  reason  why  inequity  results  when  contributions  are  increased  is  that  it  isf  im- 
practicable to  make  the  increase  for  advanced  ages  proportionate  to  the  deficiencies 
created  by  the  aged  members. 

This  is  strongly  brought  out  by  the  analysis  of  readjustment  plan  (c) ,  which 
Messrs.  Watson  declare  to  be  the  ideal  reformative  measure,  considered  theoretically, 
but  impractical  when  applied  to  actual  conditions : 

The  effect  of  a  readjustment  which  goes  to  the  extreme  in  burdening  the  young 
members,  such  as  indicated  by  plan  (e),  is  forcibly  demonstrated  by  the  Unity  Ac- 
tuaries. 

The  effect  of  doing  nothing  is  graphically  set  forth  in  the  concluding  demonstrations. 

At  a  small  outlay  the  Eighth  Valuation  Report,  made  by  the  Messrs.  Watson,  can 
be  secured  from  the  Manchester  Unity  Offices,  97  Grosvenor  Street,  Manchester,  Eng- 
land, and  I  commend  it  to  those  who  desire  to  pursue  this  subject. 

The  general  method  for  readjustments  in  the  United  States  and  Canada  has  been 
to  increase  the  contribution  rates,  with  options  for  continuing  the  existing  rates  and 
having  designated  amounts  charged  as  liens  against  certificates  to  be  deducted  at  death 
(sometimes  with  and  sometimes  without  interest)." 

When  actuarial  advice  has  been  ignored  or  never  sought  the  favorite  method  has 
been  to  adopt  a  net  contribution  scale  according  to  some  standard  table  of  mortality 
(most  often  the  National  Fraternal  Congress  Table  of  Mortality  and  4  per  cent  in- 
terest) and  apply  these  rates  as  of  ages  at  entry  into  the  Society,  and  to  apply  the 
same  rates  to  new  members  at  their  attained  ages'  on  entering  the  Society.  All  mem- 
bers were  then  put  into  mutual  cooperation  and  the  excess  contributions  of  the  recent 
entrants  commingled  with  the  common  funds,  and  largely,  if  not  entirely,  used  to  make 
good  the  deficiencies  in  the  rates  of  the  older  members. 

This  combination  of  inadequacy  and  injustice  could  end  in  nothing  but  failure. 

With  readjustments  must  not  be  confused  the  heretofore  common  practice  of  so- 
cieties adopting  new  contribution  scales  for  new  members  while  leaving  the  old  mem- 
bers on  original  schedules,  and  then  commingling  contributions  and  accumulation  to 
the  great  advantage  of  the  older  members,  and  equally  to  the  detriment  of  the  entrants 
upon  the  increased  rates. 

The  rerating  of  members  at  ages  of  entry,  but  compelling  them  to  contribute  on  the 
same  scale  as  new  members,  being  justly  characterized  as  unfair  and  inequitable  to  the 
recent  entrants,  where  the  latter  are  placed  into  the  class  with  existing  members,  it 
is  unnecessary  to  comment  upon  the  method  of  leaving  existing  members  upon  inade- 
quate rates,  and  placing  new  members  upon  an  increased,  and  often  a  per  se  adequate 
scale,  and  then  making  one  class  of  the  whole  membership. 


118 

The  readjustments  of  rates  by  Societies  of  the  United  States  and  Canada  have  al- 
most universally  favored  two  classes  of  members ;  one  class  being  those  at  advanced 
ages  and  the  other  those  who  have  been  members  for  a  number  of  years. 

The  results  of  such  readjustments  have  always  created  deficiencies  by  the  conces- 
sions granted  to  these  two  classes  of  members. 

Notwithstanding  these  concessions,  it  has  been  the  exception  when  the  readjust- 
ment was  accepted  by  the  'membership  without  dissatisfaction,  dissension  and  with- 
drawal. Usually  the  withdrawals  being  of  the  good  lives. 

Even  with  the  most  liberal  concessions,  rates  of  contribution  for  the  members  at 
advanced  ages  were  very  high  when  consideration  is  had  of  the  very  low  rates  of 
contribution  which  the  members  had  been  accustomed  to  paying.  This  fact  has  al- 
ways caused  dissatisfaction  amongst  the  aged  members,  which  has  been  reflected-  upon 
the  younger,  resulting  in  heavy  withdrawals,  and  these  withdrawals  have  in  turn 
affected  the  death  rate  of  the  remaining  members  unfavorably. 

In  most  instances  the  adverse  selection  due  to  withdrawal  of  young  and  recent 
entrants  has  passed  away  within  two,  three  or  four  years,  and  a  return  to  normal 
death  rate  has  been  the  rule.  However,  I  have  known  cases  where  the  adverse  and 
unfavorable  conditions  continued  indefinitely,  making  a  second  readjustment  neces- 
sary. In  cases  where  this  second  readjustment  did  not  place  the  organization  in  a 
financially  sound  condition,  ordinarily  a  third  change  resulted  in  decay  and  final 
dissolution  of  the  Society. 

A  large  number  of  Societies  have  adopted  readjustment  where  the  members 
younger  than  a  certain  designated  age  were  required  to  pay  as  of  their  attained  ages 
the  contribution  rates  based  upon  some  standard  mortality  table,  while  the  members 
older  than  the  designated  age  have  been  given  a  rate  less  than  that  for  the  attained 
age  and  many  times  have  been  given  the  level  rate  as  of  the  designated  age,  say  55, 
60  or  65  or  7°-  1°  these  cases,  of  course,  the  Society  was  divided  into  two  classes, 
one  being  those  who  were  favored  with  rates  less  than  the  attained  age  at  the  time 
of  the  readjustment  and  others  charged  the  full  rate  under  the  assumptions  of  some 
mortality  table,  usually  the  National  Fraternal  Congress  Table  of  Mortality  with  4 
per  cent  interest. 

In  a  number  of  cases  the  readjustment  has  been  made  so  that  the  members  younger 
than  a  designated  age  have  been  charged  the  rate  according  to  some  standard  table 
as  of  their  attained  ages  at  the  date  of  rerating,  while  members  older  than  the 
designated  age  have  been  given  a  lower  rate  than  the  one  justified  by  their  attained 
ages,  and  in  addition  to  this  all  of  the  available  funds  of  the  Society  have  been 
assigned  for  the  purpose  of  meeting  the  deficiency  created  by  the  concessions  to  the 
aged  members. 

One  Society  with  about  30,000  members  assigned  upwards  of  a  million  dollars  to 
the  members  above  age  65,  while  another  Society  assigned  upwards  of  three  millions 
of  dollars  to  members  above  age  55.  In  another  instance  something  over  two  mil- 
lions of  dollars  were  assigned  to  members  according  to  the  duration  of  member- 
ship ;  no  member  receiving  any  credit  who  had  not  been  a  member  for  at  least 
eighteen  years ;  and  this  assignment  was  increased  according  to  the  advanced  age 
of  the  members.  The  amount  assigned  to  the  youngest  members,  entitled  to  credit 
because  of  duration  of  membership,  was  a  few  cents,  while  to  the  oldest  members 
the  credit  was  several  hundred  dollars  on  each  thousand  of  insurance. 

In  a  noted  readjustment  where  no  funds  had  been  accumulated  prior  to  the  re- 
rating,  the  Society  adopted  rates  for  members  to  age  65  with  a  level  and  uniform 
rate  thereafter.  The  rates  below  age  65  were  loaded  for  a  fraternal  contribution 


119 

which  was  levied  upon  all  members  below  a  designated  age  and  added  to  their 
rates,  which  latter  were  sufficient  to  provide  for  their  protection.  The  younger 
members  have  never  been  heard  to  make  any  complaint  on  account  of  this  extra 
charge  against  them  for  the  purpose  of  rendering  aid  to  the  members  above  a  cer- 
tain age.  There  prevails  a  general  sentiment  that  aged  members,  regardless  of 
whether  or  not  they  need  assistance,  should  have  something  appropriated  from  the 
contributions  of  the  younger  members  for  their  relief  from  the  payment  of  assess- 
ments according  to  their  ages  and  the  risk  assumed  by  the  Society. 

Comparatively  few  readjustments  in  the  United  States  and  Canada  have  been 
upon  a  thoroughly  adequate  basis  from  the  beginning.  Ordinarily,  in  the  course  of 
operation,  other  changes  have  been  required  to  place  the  organization  in  a  sound 
financial  position.  These  second  changes  are  dangerous,  as  well  as  difficult.  The 
Societies  in  their  present  condition  are  now;  confronted  with  these  dangers  and  diffi- 
culties which  are  aggravated  by  the  situation  in  respect  of  securing  new  business. 

When  the  Societies  were  comparatively  new  and  the  membership  massed  at  the 
younger  ages  and  the  contribution  rates  lower,  business  was  easily  and  cheaply 
secured.  When  the  Societies  were  older  and  the  membership  at  the  advanced  ages 
and  contribution  rates  increased,  then  the  situation  was  entirely  changed  in  reference 
to  the  field  work.  The  members  discontinued  their  efforts  in  the  way  of  securing 
new  members,  and  the  whole  work  was  left  entirely  to  deputies  and  organizers.  This 
brought  about  a  condition  not  materially  different  from  that  existing  in  the  Life 
Insurance  business  in  respect  of  the  company  employing  agents.  The  mere  fact  of 
calling  the  solicitor  "deputy"  or  "organizer"  has  not  made  the  cost  of  their  service 
materially  less  than  the  cost  of  employing  life  insurance  agents.  In  these  circum- 
stances the  cost  for  securing!  members  by  fraternal  beneficiary  societies  approximates 
the  cost  of  getting  policy-holders  for  life  insurance  companies. 

It  has  long  been  the  slogan  of  the  fraternal  societies  that  their  expenses  have 
been  only  a  small  percentage  of  the  expenses  of  life  companies.  When  the  require- 
ments for  expense  increased,  managers  of  fraternal  societies  have  adopted  many 
devices  in  the  effort  to  meet  these  requirements  without  direct  taxation  of  the  mem- 
bership. In  fact,  it  has  been  impossible  for  them  to  collect  in  the  way  of  a  per  capita 
tax  the  amount  necessary  for  expenses,  and  when  they  load  the  net  contribution  rates 
sufficient  to  cover  the  expenses,  then  the  rates  are  so  high  that  members  complain 
and  say  that  they  are  compelled  to  pay  as  much  to  the  fraternal  societies  as  they 
would  have  to  pay  to  the  life  companies,  with  the  apparent  conclusion  that  if  they 
make  as  large  contributions  to  the  fraternal  societies  as  to  the  life  companies,  then 
they  must,  by  reason  of  that  fact,  prefer  the  companies.  Therefore,  one  of  the  most 
serious  conditions  arising  out  of  readjustments  of  contribution  rates  is  the  one  in 
reference  to  the  expense  of  management  and  of  securing  new  business. 

PROVISION  FOR  EXPENSES. 

Previous  to  1900  it  was  the  exception  for  total  expenses  for  general  management 
of  a  fraternal  beneficiary  society  to  exceed  $2.00  per  member  per  annum. 

When  new  members  were  introduced  they  were  required  to  pay  an  initiation  fee 
of  $3.00  to  $10.00.  If  the  fee  was  low,  then  the  app'icant  was  required  to  pay  for  his 
medical  examination. 

There  were  few  paid  solicitors,  and  the  original  Uniform  Bill,  prepared  and  advo- 
cated by  officials  of  fraternal  societies,  made  it  a  condition  precedent  to  admission 
to  do  business  in  the  States  that  the  society  should  not  have  paid  solicitors  or  agents 
to  secure  members  for  an  organized  lodge. 


120 

There  were  paid  organizers  and  lecturers  whose  duties  were  to  organize  new 
local  bodies,  and  for  that  purpose  to  solicit  members  until  the  requisite  number  for 
organizatiqn  was  secured,  and  then  to  visit  organized  bodies  and  enthuse  the  members 
by  public  talks  and  entertainment. 

After  the  employment  of  paid  solicitors,  or  deputies,  the  local  bodies  could  say 
whether  or  not  their  lodges  were  "open"  or  "closed"  to  them. 

Very  often  the  local  lodge  would  elect  from  its  members  a  deputy  or  solicitor  to 
be  paid  from  the  lodge  funds. 

Other  lodges  depended  entirely  upon  the  work  of  the  members,  and  the  initiation 
fees  went  into  the  lodge  treasury  for  entertainments. 

Many  societies'  then  (and  a  few  now)  had  State  jurisdictions  which  were  required 
to  bear  the  expenses  and  perform  the  work  of  securing  new  members. 

In  all  cases  the  initiation  fee  covered  the  expense  incident  to  the  introduction 
of  new  members,  excepting  the  work  and  indirect  influence  of  organizers  and  lec- 
turers who  were  usually  paid  from  the  general  funds  of  the  supreme  body. 

Those  societies  which  were  first  to  adopt  adequate  contribution  scales  for  new 
members  found  it  impossible  to  collect  the  initiation  fee  when  charging  a  rate  for 
the  same  promised  benefit  25  per  cent,  50  per  cent  and  100  per  cent  in  excess  of  the 
assessment  rates  of  competing  societies  on  inadequate  contributions. 

Losing  the  initiation  fee  compelled  resort  to  other  means  to  obtain  expenses  to 
secure  new  business. 

To  add  a  sufficient  percentage  loading  to  the  already  (comparatively)  high  net 
adequate  rates  so  increased  the  contributions  that  few  officials  believed  it  possible 
to  secure  new  business,  and  a  common  practice  was  to  appropriate  for  promotion 
expenses  the  first  one,  three,  six,  eight,  nine  and  even  twelve  monthly  payments. 
This,  of  course,  rendered  otherwise  adequate  rates  deficient,  and  increased  the  in- 
adequacy of  those  approximately  adequate. 

Some  societies  took  the  chance  of  securing  new  members  in  the  old  way  and  at 
the  old  low  assessment  of  for  expenses,  but  soon  discovered  that  the  increased  rates 
under  readjustment  (for  several  reasons)  caused  the  members  to  discontinue  their 
efforts  to  bring  in  new  members,  and  their  apathy — or  worse — made  successful  deputy 
work  very  difficult  as  well  as  very  expensive. 

This  condition  induced  conservative  and  experienced  officials  to  encroach  upon 
the  net  contributions  (already  burdened  with  deficiencies  due  to  concessions  granted 
to  aged  members  under  readjustment).  This  practice  was  quite  general  and  was 
excused  on  the  plea  that  it  was  only  a  temporary  expedient  to  meet  an  abnormal 
situation. 

Conditions  after  readjustment  were  so  trying  and  the  difficulties  so  great  that  I 
have  consented  to  such  expedients,  hoping  and  trusting  that  the  judgment  of  the 
officials  was  correct,  and  myself  believing  that  dissension,  dissatisfaction  and  agita- 
tion could  not  continue  for  more  than  two  or  three  years,  and  on  recovery  to  normal 
condition  the  appropriation  from  the  net  contributions  could  be  discontinued.  It 
appeared  better  to  take  this  risk  than  to  create  new  disturbance  by  calling  for  addi- 
tional expense  contributions. 

No  one  can  appreciate  the  difficulties  following  an  adequate  rate  readjustment 
unless  he  has  had  to  meet  and  try  to  overcome  them.  Anyone  so  situated  will  take 
chances  with  hope  on  the  prospect  of  future  favorable  conditions  rather  than  aggra- 
vate troubles  due  to  no  fault  of  the  management. 


121 

In  many  cases  the  hope  was  realized.  In  most  instances  the  increased  fund  for 
expenses  brought  about  high-pressure  methods,  and  new  members  were  introduced 
at  the  front  only  to  make  their  exit  at  the  back  door. 

Bonuses,  prizes,  excursions,  tours  and  large  cash  commissions  were  offered,  with 
the  usual  result  of  such  methods  that  members  were  lost  almost  as- fast  as  secured 
with  small  gain  from  large  expenditures  and  often  an  adverse  mortality  experience 
amongst  the  members  at  admission  ages,  due  to  the  nearly  equivalent  influx  and 
efflux  of  fresh  lives  and  the  natural  sediment  from  such  flow  in  the  way  of  early 
deaths  and  impaired  risks.  In  other  words,  any  such  method  for  securing  new  busi- 
ness makes  of  the  society  a  duct,  with  refuse  and  settlings  the  main  leavings. 

I  have  protested  in  vain  against  the  inauguration  of  such  methods,  often  consent- 
ing to  a  moderate  temporary  encroachment  upon  net  contribution  rates.  The  field 
men  would  clamor  for  larger  appropriations,  and  the  officials  and  agency  managers, 
in  their  laudable  desire  to  prevent  loss  in  membership,  would  yield  to  pressure,  with 
ultimate  unsatisfactory  results. 

At  this  writing,  all  of  the  societies  (with  few  exceptions)  have  changed  contribu- 
tion rates  to  some  degree,  and  nearly  all  of  them  are  struggling  to  maintain  their 
business  without  taxing  the  members  with  increased  expense  charges. 

There  are  various  methods  for  creating  an  expense  fund. 

Some  societies  rely  entirely  upon  a  per  capita  tax.  Some  have  a  per  capita  tax 
and  an  additional  level  or  percentage  loading  to  the  net  rates.  Some  have  a  per 
capita  tax  and  take  a  stated  number  of  the  first  twelve  monthly  assessments.  Some 
take  a  percentage  of  the  gross  rates  and,  in  addition,  use  all  or  some  portion  of  the 
first  twelve  assessments.  Others  take  a  flat  amount  from  the  gross  rates  and  use 
all  or  a  portion  of  the  first  twelve  assessments.  Others  take  a  flat  amount  (or  per- 
centage) of  the  gross  rates  and  in  addition  50  cents,  60  cents,  75  cents  to  $1.00  from 
each  of  the  first  twelve  monthly  payments. 

There  are  numerous  other  methods  to  provide  for  expenses,  but  the  above  will 
cover  the  majority  of  cases. 

There  is  no  fixed  rule  for  general  application  in  the  provision  for  expenses. 

The  method  of  taking  from  the  first  twelve  assessments  a  level  amount  of  50 
cents,  60  cents,  or  75  cents,  and  then  having  a  per  capita  tax,  or  in  subsequent  years 
deducting  a  flat  (or  percentage)  amount  from  the  gross  rates,  more  nearly  than  any 
other  accords  with  the  old  practice  of  a  per  capita,  or  flat  or  percentage  loading, 
and  an  initiation  fee.  The  deduction  of  60  cents  per  month  ($7.20  a  year)  provides 
about  the  average  initiation  fee,  and  when  its  value  in  the  way  of  annuity  addition 
is  loaded  into  the  rate  the  member  pays  back  to  the  society  the  amount  of  the  deduc- 
tion. Formerly  he  paid  the  initiation  fee  in  one  sum  or  in  two,  four  or  twelve  in- 
stalments. He  pays  back  the  $6.00,  $7.20  or  $9.00  by  instalments  covering  the  period 
of  protection,  and  thus  each  instalment  is  small  and  is  therefore  paid  without  objec- 
tion. It  is  a  device  for  collecting  the  initiation  fee  from  an  entrant  without  his 
special  knowledge  of  the  fact. 

Many  conferences  have  been  held  by  officials  and  managers  of  fraternal  societies 
concerning  "adequate  rates,"  and  many  supreme  bodies  have  passed  upon  the  ques- 
tion of  "adequate  rates,"  but  no  concerted  attempt  has  been  made  to  come  to  an 
agreement  in  regard  to  expense  provision,  and  yet  this  is  a  matter  of  so  much  im- 
portance that  the  failure  to  properly  and  effectively  provide  for  expenses  may  result 
in  financial  insolvency. 


122 


FRATERNAL  EXPERIENCE  TABLES. 

In  1904  a  number  of  the  leading  fraternal  beneficiary  societies  readjusted  contri- 
bution rates  on  the  basis  of  the  National  Fraternal  Congress  Table  of  Mortality. 
The  readjustment  agitation  was  so  general  that  question  arose  as  to  the  sufficiency 
of  the  N.  F.  C.  table,  resulting  in  a  request  from  the-  president  of  the  members  of 
the  Congress  to  supply  data  for  a  test  of  that  table. 

The  suggestion  of  President  Talbot  was  favorably  received,  and,  under  instruc- 
tions of  the  Congress,  the  Committee  on  Statistics  and  Good  of  the  Orders  made  a 
report  in  1906  at  Montreal,  from  which  I  take  the  following: 

Your  committee  herewith  submits  its  special  report  to  which  reference  is  made 
in  the  regular  report  concerning  the  collection  of  data  of  the  societies  under  a  reso- 
lution offered  by  Doctor- Oronhyatekha,  past  president,  at  the  last  session  of  the 
Congress,  which  resolution  was  as  follows: 

"Resolved,  That  the  executive  committee  of  this  Congress  be  authorized  to  take 
such  steps  as  they  may  deem  best  to  secure  correct  data  for  a  minimum  table  for  a 
society  in  a  normal  condition,  based  on  the  experience  not  only  of  societies  but  the 
experience  of  life  insurance  companies  as  well." 

Letters  were  sent  to  all  of  the  societies  in  the  United  States  requesting  the  data 
on  forms  which  were  supplied  by  the  chairman  of  the  committee,  a  sample  of  which 
is  attached  to  this  report  as  an  exhibit  and  which  fully  sets  forth  the  information 
which  was  desired  and  which  was  supplied  to  the  actuary  for  such  societies  as  fur- 
nished the  same.  The  names  of  the  societies  responding  are  as  given  below,  grouped 
according  to  whether  or  not  they  admit  men  only,  women  only,  or  men  and  women: 

SOCIETIES  ADMITTING  MEN  ONLY. 


NAMES. 

Commenced 
Business. 

Members, 
Dec.  31,1904. 

Exposures 
During  1904. 

Knights  of  Maccabees  of  the  World  

1883 

325,071 

341,255  0 

Modern  Woodmen  of  America  

1883 

690,881 

689,265  5 

Shield  of  Honor  ;  

1875 

13,204 

13,074  5 

Society  des  Artisans  

1877 

23,020 

21,647  5 

Catholic  Mutual  Benefit  Association  

1876 

57,028 

59,221  0 

Knights  of  Father  Mathew  

1881 

4,124 

4,038  0 

Improved  Order  of  Heptasopiis  

1878 

55,377 

55,228  0 

Knights  of  Pythias,  Endowment  Rank  

1877 

68,202 

67,582  0 

Knights  of  Honor  

1873 

40,126* 

46,129  5* 

Ancient  Order  United  Workmen  (22  Juris)  

1868 

219,490 

248,790  5 

Knights  of  Modern  Maccabees  

1881 

116,205* 

119,684  5* 

Tennessee  Jurisdiction  of  A.  O.  U.  W  

1875 

1,911 

2,025  5 

National  Union  

1881 

65,372 

66,993  5 

Royal  Arcanum  ;  

1877 

305,083 

295,673.0 

Loyal  Association  

1889 

7,246 

7,115  0 

Woodmen  of  the  World  (Pac.  Juris.)  

1890 

90,680 

90,687.0 

Totals   

2,083,020 

2,128,410.0 

SOCIETIES  ADMITTING  WOMEN  ONLY. 


NAMES. 

Commenced 
Business. 

Members, 
Dec.  31,  1904. 

Exposures 
During  1904. 

Ladies  of  Maccabees  of  the  World  

1892 

123,434 

119,367.5 

Royal  Neighbors  of  America 

1895 

83,423 

79,292.5 

Ladies  of  tne  M^odern  M^accabees 

1890 

61,880 

60,176.0 

Ladies'  Catholic  Benevolent  Association 

1890 

89,808 

89,392.0 

Totals  

358,545 

348,228.0 

123 


SOCIETIES  ADMITTING  MEN  AND  WOMEN. 


NAMES. 

Commenced 
Business. 

Members 
Dec.  31,1904. 

Exposures 
During  1904. 

1893 

5,101 

4,936.5 

Association  Canado-Americaine  
Eouitable  Fraternal  Union                                       •    •  • 

1897 
1897 

5,298 
14,644 

5,219.0 
13,561.0 

Fraternal  Brotherhood                                              .... 

1896 

23,412 

22,048.5 

Loyal  ^Mystic  Legion  of  America                        

1892 

6,718 

6,707.5 

Order  IVlutual  Protection                                  

1878 

8,101 

8,133.5 

Order  of  the  White  Cross                                  

1900 

1,836 

1,688.5 

Protected  Home  Circle                             

1886 

55,736 

58,652.0 

LTnited  Order  Pilgrim  Fathers                 .        

1879 

19,698 

20,986.0 

Sons  and  Daughters  of  Protection  

1897 

1,794 

1,842.0 

United  Presbyterian  Mutual  Benefit  Association  
Legion  of  the  Red  Cross 

1897 

1885 

3,128 
2,549 

3,212.5 
2,666.5 

Royal  Highlanders     

1896 

18,553 

17,775.5 

Court  of  Honor      

1895 

67,815 

68,612.5 

Mystic  Workers  of  the  World 

1896 

32,550 

30,961.5 

Prudent  Patricians  of  Pompeii                                 .... 

1897 

7,379 

7,343.0 

United  Order  of  Golden  Cross                         .        ... 

1876 

18,558 

19,620.5 

Fraternal  M^ystic  Circle                                   

1885 

14,503 

15,396.0 

Knights  and  Ladies  of  Security        .  .        

1892 

46,161 

44,924.0 

Fraternal  Union  of  America  .                  

1896 

24,045 

24,047.5 

Modern  Samaritans  of  Duluth  

1897 

6,758 

6,437.0 

Fraternal  Tribunes      

1897 

9,696* 

9,103.0* 

Royal  Templars  of  Temperance  

1870 

7,620f 

9,654.5f 

Totals  

401,653 

403,528.5 

SUMMARY. 


NAMES. 

Number  of 
Societies. 

Members, 
Dec.  31,04. 

Exposures 
During  1904. 

Societies  admitting  men  only  

16 

2,083,020 

2,128,410.0 

Societies  admitting  women  only  

4 

358,545 

348,228.0 

Societies  admitting  men  and  women 

23 

401,653 

403,528  5 

Totals                                             .            

43 

2,843,218 

2,880,166.5 

NOTE. — Numbers  marked  with  *  give  data  for  1905  instead  of  1904;  numbers  marked  with 
t  give  data  for  1903  instead  of  1904. 


The  committee  desires  to  thank  the  officials  of  the  above  named  societies  for  their 
compliance  with  the  request  to  supply  the  data  and  also  to  thank  the  secretaries  for 
the  neatness  of  the  forms  submitted. 

Many  of  the  reports  gave  the  data  by  amounts,  and  as  it  was  decided  that  the 
experience  should  be  based  upon  lives  instead  of  amounts  of  protection,  it  was 
necessary  in  many  cases  to  make  combinations,  which  required  a  considerable  amount 
of  work  in  the  office  of  the  actuary. 

The  committee  has  inspected  and  examined  all  of  the  original  reports,  together 
with  the  compilations  made  therefrom;  also  the  tabulations  and  deductions  after- 
wards prepared  and  which  are  now  subject  to  inspection  by  any  member  of  the 
Congress.  It  is  impossible  for  your  committee  to  render  a  detailed  statement  that 
would  present  the  amount  of  work  which  has  been  done  by  the  actuary  inasmuch  as 
the  compilations  and  tabulations  fill  hundreds  of  large  sheets.  Perhaps  only  those 
whose  business  it  is  to  work  with  statistics  can  fully  appreciate  and  realize  the  amount 


124 

of  labor  necessary  to  produce  one  column  of  figures  representing  the  death  rate  of 
the  43  societies.  Each  one  of  the  43  organizations  sent  in  three  sheets  showing  the 
members  in  good  standing  at  the  end  of  the  year  of  observation  and  the  member 
who  had  lapsed  and  died  during  the  year.  These  statistics  were  not  combined  so 
as  to  obtain  three  corresponding  sheets  with  a  combined  showing  of  existing  mem- 
bers and  of  members  who  had  lapsed  and  died,  and  from  this  latter  the  combined  ex- 
posures obtained,  but  the  actuary  worked  out  separately  for  each  society  the  exposures  in 
order  to  obtain  the  death  and  lapse  rates  for  each  one  individually.  Seven  separate  sheets, 
as  hereinafter  stated,  were  prepared  for  each  of  the  43  societies  and  these  should  be 
taken  into  consideration  and  inspected  by  the  officials  of  each  society.  After  ob- 
taining the  individual  statistics  for  each  society  and  treating  them  as  above  indi- 
cated, the  four  separate  combinations  were  made  as  heretofore  stated,  for  societies 
that  admit  men  only,  that  admit  women  only  and  that  admit  men  and  women  and 
then  £or  all  of  the  societies  combined.  The  work  consisted  in  preparing  data  from 
each  of  the  43  societies  which  could  be  used  in  constructing  mortality  tables  for  each 
of  the  societies.  Your  committee  repeat  that  it  is  almost  impossible  for  anyone 
to  fully  appreciate  the  amount  of  labor  involved  unless  he  make  personal  inspection 
of  the  trunk  full  of  papers  which  have  been  submitted  to  your  committee  by  the 
actuary. 

To  obtain  exposures  for  death  rate  there  was  taken  the  sum  of  all  the  members 
in  good  standing  at  the  end  of  the  year  who  had  entered  the  society  in  previous 
years  and  one-half  of  all  of  the  members  existing  at  the  end  of  the  year  who  had  joined 
the  societies  during  the  year  and  one-fourth  of  all  the  members  who  lapsed  during 
the  year  and  all  of  the  deaths  during  the  year. 

To  obtain  the  exposures  for  lapse  rate  there  was  taken  the  sum  of  all  the  mem- 
bers existing  at  the  end  of  the  year  of  observation  who  had  entered  the  society  in 
previous  years,  and  one-half  of  all  the  members  existing  at  the  end  of  the  year  who 
had  entered  during  the  year,  and  one-fourth  of  all  the  members  who  died  during  the 
year,  and  all  of  the  members  who  lapsed  during  the  year. 

To  obtain  the  death  rate  the  number  of  deaths  during  the  year  was  divided  by 
the  number  of  exposures. 

To  obtain  the  lapse  rate  the  number  of  lapses  during  the  year  was  divided  by 
the  number  exposed  to  the  risk  of  lapse  during  the  year. 

The  death  rate  obtained  as  above  mentioned  is  the  unadjusted  death  rate  accord- 
ing to  the  actual  experience  of  the  societies.  This  unadjusted  death  rate,  as  will 
be  seen  by  reference  to  the  tables  herewith  submitted,  is  irregular  by  attained  ages 
and  by  years  of  membership.  Not  only  is  this  original  and  unadjusted  death  rate 
irregular,  but  it  embraces  only  those  years  covered  by  the  experience  of  the  societies, 
which  in  this  case  is  for  thirty-four  years  of  membership  and  to  age  ninety  for  the 
oldest  exposed  risk.  In  order  to  convert  this  unadjusted  data  into  practical  form 
it  was  necessary  to  grade  and  extend  the  unadjusted  death  rate. 

There  are  several  well  known  formulas  by  which  the  mortality  experience  can  be 
graded  or  adjusted.  One  is  the  so-called  "Makeham"  formula,  which  recognizes  the 
"Force  of  Mortality."  Another  is  by  the  graphic  method,  and  still  another  by  the 
summation  method,  which  latter  was  adopted  in  the  grading  of  the  mortality  ex- 
perience herewith  submitted.  In  the  case  of  the  forty-three  combined  societies  and 
in  the  case  of  the  experience  for  men  only  and  for  men  and  women  the  formula 
selected  was  that  used  by  Mr.  Watson  in  grading  the  experience  of  the  Manchester 
Unity.  The  one  selected  for  grading  the  experience  of  the  societies  that  admitted 
women  only  was  the  "Hardy"  formula  given  in  his  prize  essay  on  Friendly  Societies. 
There  were  several  gradings  or  adjustments  by  different  formulas,  but  the  ones  just 
mentioned  gave  the  most  satisfactory  results  as  evidenced  by  the  tests  of  the  grading 
submitted  by  the  actuary. 

The  actuary  has  given  the  number  living  and  the  number  dying,  assuming  100,000 
lives  at  the  lowest  age,  according  to  the  unadjusted  and  the  adjusted  death  rate  for 
the  combined  forty-three  societies. 

The  committee  have  thought  it  advisable  to  make  the  above  brief  explanation 
for  the  benefit  of  those  who  may  desire  to  critically  examine  the  statistics  and  de- 
ductions submitted  by  the  actuary. 

It  is  assumed  that  the  members  of  the  Congress  will  be  most  interested  in  the 
rates  of  contribution  which  have  been  derived  from  the  several  mortality  tables 
herewith  submitted.  For  the  information  of  the  members  we  present  in  comparative 
form  the  net  annual  level  rates  of  contribution  per  one  thousand  dollars  protection, 
for  death  benefit  only,  according  to  the  National  Fraternal  Congress  Table  of  Mor- 
tality and  according  to  the  combined  experience  of  the  forty-three  societies  as  ob- 


125 


NET  ANNUAL  RATES  OF  CONTRIBUTION  PER  $1,000. 


Age. 

N.  F.  C. 

43  Societies. 

Women. 

Men. 

Men  and 
Women. 

17  

.$  

$  9  25 

$  9  29 

$  9  20 

$  8  98 

18  -  

9.48 

9  50 

9  45 

9  23 

19  

9.73 

9.71 

9.73 

9  48 

20 

10  34 

10  01 

9  94 

9  99 

9  75 

21. 

10  62 

10  30 

10  18 

10  30 

10  04 

22.  . 

10  92 

10  58 

10  44 

10  58 

10  32 

23  

11  24 

10  90 

10  70 

10  90 

10  63 

24  

11  57 

11  22 

10  99 

11  24 

10  95 

25  

11.91 

11  56 

11  29 

11  59 

11  29 

26  

12.28 

11  94 

11  62 

11  99 

11  64 

27 

12  67 

12  35 

11  94 

12  40 

12  02 

28 

13  07 

12  77 

12  30 

12  85 

12  43 

29.. 

13  50 

13  24 

12  66 

13  33 

12  85 

30  

13  96 

13  73 

13  06 

13  81 

13  33 

31..  .. 

14  43 

14  25 

13  46 

14  36 

13  81 

32  

14  93 

14  79 

13  89 

14  90 

14  34 

33 

15  47 

15  36 

14  36 

15  51 

14  87 

34 

16  02 

15  95 

14  84 

16  12 

15  42 

35. 

16  62 

16  57 

15  36 

16  76 

16  00 

36. 

17  24 

17  25 

15  92 

17  47 

16  60 

37. 

17  90 

17  94 

16  48 

18  20 

17  25 

38... 

18  59 

18  71 

17  12 

18  98 

17  91 

39  

19  33 

19  51 

17  78 

19  78 

18  65 

40  

20  11 

20  36 

18  52 

20  68 

19  41 

41 

20  93 

21  28 

19  28 

21  60 

20  26 

42 

21  80 

22  22 

20  09 

22  59 

21  17 

43.. 

22  72 

23  27 

20  96 

23  61 

22  11 

44.. 

23  69 

24  35 

21  89 

24  71 

23  08 

45  

24  72 

25  48 

22  93 

25  89 

24  16 

46  

25  81 

26  73 

24  00 

27  16 

25  23 

47  

26  97 

28  03 

25  15 

28  52 

26  39 

48  

28  20 

29  43 

26  39 

29  94 

27  63 

49. 

29  51 

30  93 

27  72 

31  47 

28  Q2 

50.. 

30  91 

32  51 

29  06 

33  12 

SO  SI 

51  

32  39 

34  21 

30  50 

34  85 

31  81 

52  

33  97 

36  05 

32  06 

36  67 

33  38 

53  

35  65 

37  99 

33  69 

38  64 

35  12 

54  

37  45 

40  03 

35  50 

40  72 

37  01 

55 

39  36 

42  18 

37  41 

42  91 

QO  88 

56... 

41  41 

44  46 

39  54 

45  22 

40  QO 

57  

43  60 

46  86 

41  73 

47  67 

43  10 

58  

45  94 

49  49 

43  98 

50  27 

45  43 

59.. 

48  45 

52  20 

46  21 

52  05 

47  Q7 

60.. 

51  13 

55  08 

48  49 

55  88 

KA  fi7 

61  

54  01 

58  16 

50  82 

59  00 

5Q  fiO 

62  

57  10 

61  44 

53  28 

62  34 

5fi  70 

63  

60  41 

64  95 

55  88 

65  81 

60  16 

64  

63  98 

68  72 

58  72 

69  65 

63  58 

65  

67  82 

72  65 

61  94 

73  65 

67  14 

66  

71  95 

76  88 

65  38 

77  OF: 

7ft  8S 

67  

76  40 

81  44 

69  18 

co  fin 

74  41 

68  

81  21 

86  23 

73  27 

87  64 

78  99 

69  

86  39 

91  41 

77  68 

93  12 

82  02 

70  

92  00 

97  04 

82  31 

99  09 

86  07 

NOTE. — Contributions  to  be  paid  annually  in  advance  for  the  whole  term  of  life  and 
provide  for  death  benefit  only. 


126 

tained  by  the  actuary;  also  rates  according  to  the  experience  of  those  societies  ad- 
mitting women  only  and  of  those  societies  admitting  men  and  women  and  of  those 
societies  admitting  men  only. 

It  will  be  observed  that  the  rates  of  contribution  according  to  the  National  Fra- 
ternal Congress  Table  are  in  excess  of  those  deduced  from  the  experience  of  the 
combined  experience  of  the  forty-three  societies  for  ages  below  36.  The  rates  at 
age  36  are  respectively  $17.24  and  $17.25  and  above  that  age  the  rates  according  to 
the  combined  experience  of  the  forty-three  societies  are  slightly  in  excess  of  the  Na- 
tional Fraternal  Congress  rates  to  age  50,  varying  from  one  cent  annually  at  age 
36  to  $1.60  at  age  50.  Above  age  50  the  excess  in  the  rates  for  the  combined  experi- 
ence becomes  larger  as  the  age  advances  until  at  age  70  the  level  annual  rate  of  the 
National  Fraternal  Congress  Table  is  $92.00  and  by  the  combined  experience  $97.04. 

It  should  be  noted  that  the  above  rates  are  annual  rates  to  be  paid  in  advance 
and  are  upon  the  assumption  of  four  per  cent  interest  earned  on  accumulations. 
Rates  payable  monthly  would  be  somewhat  in  excess  of  one-twelfth  of  the  annual 
rates,  due  to  the  loss  ot  interest  and  also  to  the  loss  of  monthly  installments  on  ac- 
count of  members  who  die  and  lapse  before  the  end  of  the  year. 

The  totals  show  that  the  expected  deaths  by  the  National  Fraternal  Con- 
gress Table  were  26,239;  the  actual  being  95.75  per  cent  of  the  expected.  The 
per  cent  exposed  below  age  50  was  82.90,  while  the  per  cent  of  deaths  below  age  50 
was  56.68. 

The  expected  deaths  by  the  American  Experience  Table  were  9,322  in  excess  of 
the  actual  deaths;  the  actual  being  72.94  per  cent  of  expected.  It  may  be  stated  in 
passing  that  these  figures  certainly  established  the  fact  that  the  American  Experience 
Table  of  Mortality  could  not  be  correctly  designated  as  a  "minimum"  table  for  fra- 
ternal beneficiary  societies. 

Your  committee  is  of  the  opinion  that  the  National  Fraternal  Congress  Table 
of  Mortality  is  sustained  by  the  actual  experience  as  an  acceptable  "minimum" 
table  for  fraternal  societies  where  admission  of  members  is  confined  to  persons  whose 
ages  are  not  above  age  50.  Your  committee  is  not  prepared  to  say  that  rates  of 
contribution  deduced  from  the  National  Fraternal  Congress  Table  would  be  inade- 
quate for  persons  admitted  to  ages  55  or  even  60  if  proper  medical  selection  is  exer- 
cised, because  it  is  a  fact  that  under  proper  medical  examination  the  death  rate  during 
at  least  the  first  five  years  of  membership  for  entrants  between  the  ages  of  50  and  60 
is  below  that  which  is  assumed  under  the  National  Fraternal  Congress  Table. 

Your  committee  further  desires  to  call  attention  to  the  fact  that  the  great  majority 
of  the  societies  composing  the  Congress  do  not  admit  members  above  age  50,  and 
consequently  the  experience  which  has  been  investigated  has  not  been  modified 
above  age  55  by  favoiable  mortality  resulting  from  the  admission  of  new  lives  treshly 
selected  by  medical  examination.  The  actuary  is  of  the  opinion  that  the  higher  death 
rate  above  age  53  is,  in  a  measure,  the  result  of  the  absence  of  new  risks  amongst  the 
members  above  age  50. 

Your  committee  call  attention  to  the  fact  thac  the  data  we  have  compiled  are 
such  that  from  them  "Select"  and  "Ultimate"  tables  can  be  readily  made  at  any 
time. 

The  resolution  contemplated  a  presentation  by  your  committee  of  the  experience 
of  life  companies,  and  an  effort  was  made  to  secure  data  from  companies  in  the 
United  States  and  Canada.  Courteous  replies  were  received  from  23  companies, 
acknowledging  the  importance  of  the  work  and  expressing  appreciation  of  the  under- 
taking, but  regretting  inability  to  comply  with  the  request  for  data  on  account  of 
the  very  heavy  demands  for  special  information  required  by  investigating  commit- 
tees in  New  York,  Wisconsin,  Iowa,  New  Jersey  and  the  Dominion  of  Canada.  Your 
committee  submits  a  number  of  mortality  tables  which  have  been  constructed  from 
various  experiences  and  may  be  of  value  for  comparison. 

The  actuary  will  supplement  this  report  with  some  comments  on  tables  and 
schedules  of  rates  derived  from  the  separate  experiences,  to  which  references  have 
been  made.  The  rates  of  contribution  for  societies  admitting  women  only  are  below 
those  given  in  the  other  schedules,  which  is  largely  due  to  the  fact,  as  your  commit- 
tee is  advised,  of  the  Jack  of  exposures  at  advanced  ages  to  give  a  basis  for  a  reliable 
table.  Your  committee  submits  two  mortality  tables  for  female  lives  as  a  better 
guide  than  the  table  which  has  been  based  upon  the  four  women's  societies  that  favored 
your  committee  with  data. 


127 

SUPPLEMENTAL  REPORT. 

Supplementary  to  the  "Special  Report"  of  the  Committee  on  Statistics  and  the 
Good  of  the  Orders  the  following  notes  were  submitted  by  Mr.  Landis: 

First.  The  experience  of  the  43  societies  is  for  a  single  year  of  operation.  Unless 
the  selected  year  is  a  normal  one,  the  results  could  not  be  accepted  as  reliable.  If  it 
were  specially  healthy  or  unhealthy  obviously  it  would  be  unsuitcd  as  the  basis  for 
an  investigation  which  aimed  at  average  results. 

The  year  1904  was  selected  because  the  conditions  appeared  normal  in  respect  of 
mortality.  There  was  some  disturbance  on  account  of  readjustment  of  rates  of 
contribution,  causing  an  increase  in  lapse  rates  and  somewhat  increasing  the  death 
rate,  especially  at  ages  above  50  through  loss  of  good  lives.  With  these  exceptions 
the  year  1904  was  an  average  year,  and  since  there  were  nearly  three  million  expos- 
ures, widely  distributed  throughout  the  United  States,  the  experience  must  be  ac- 
cepted as  approximately  representing  past  and  present  and  forecasting  future  mor- 
tality conditions  amongst  insured  lives  in  Fraternal  Beneficiary  Associations  oper- 
ating along  existing  lines. 

Second.  To  what  has  been  said  by  the  committee  in  reference  to  the  grading 
of  the  tables,  it  may  be  added  that  this  investigation  has  disclosed  conditions  which 
have  been  found  in  so  many  others  that  a  mere  mention  of  them  is  sufficient.  I 
refer  to  the  feature  of  a  higher  death  rate  at  the  lowest  admission  ages  than  at  ages 
from  25  to  about  35,  and  the  almost  uniform  ratios  for  the  ten  years  35  to  45.  The 
unusual  showing  is  the  decrease  in  the  increase  of  mortality  for  ages  after  70. 

If  the  adjusted  rates  are  to  reflect  actual  conditions  (as  they  should),  these  char- 
acteristics must  remain,  and  to  that  end  I  made  use  of  formulas,  as  explained  by  the 
committee.  The  modern  and  best  thought  amongst  actuaries  is  in  favor  of  such 
grading  as  will  retain  the  true  character  of  the  original  data,  and  to  abandon  those 
analytical  methods  which  have  made  so  many  tables  a  mere  fiction. 

As  before  stated,  the  only  object  was  to  smooth  out  the  irregularities  which  are 
always  present  in  vital  statistics,  without  destroying  the  characteristic  features  of 
the  experience.  When  the  actual  death  rate  at  20  is  higher  than  at  30  (as  is  found  in 
almost  every  investigation  of  insured  lives)  the  adjusted  table  should  retain  that 
feature,  and  any  grading  which  destroys  it,  results  in  a  fiction,  however  much  it  may 
please  the  theorist  who  would  confirm  his  ideal  of  a  "Law  of  Mortality." 


128 
FORTY-THREE  SOCIETIES. 


Ages. 

Existing. 

Lapses. 

Deaths. 

Exposures. 

Unadjusted 
Death  Rate 
per  1000. 

Adjusted 
Death  Rate 
per  1000. 

16 

295 

39 

167.0 

17 

111 

112 

1 

539.5 

1.85 

4.64 

18 

13,001 

2,847 

30 

8,188.5 

3.66 

4.66 

19 

22,919 

7,195 

96 

20,691.0 

4.64 

4.68 

20 

30,451 

9,136 

139 

29,387.0 

4.73 

4.71 

21 

39,376 

10,541 

182 

37,455.5 

4.85 

4.73 

22 

46,295 

11,766 

192 

45,400.5 

4.23 

4.74 

23 

51,448 

12,087 

264 

51,067.0 

5.17 

4.71 

24 

58,476 

12,661 

266 

58,009.5 

4.59 

4.66 

25 

62,146 

12,587 

314 

62,341.0 

5.04 

4.59 

26 

65,979 

12,108 

292 

66,119.0 

4.42 

4.52 

27 

71,119 

12,081 

300 

71,162.5 

4.22 

4.47 

28 

76,251 

12,338 

334 

76,302.0 

4.38 

4.46 

29 

79,624 

11,822 

343 

79,672.5 

4.31 

4.50 

30 

81,801 

11,532 

365 

82,017.0 

4.45 

4.60 

31 

84,569 

11,387 

402 

85,236.5 

4.72 

4.73 

32 

86,700 

10,982 

432 

87,207.0 

4.95 

4.89 

33 

87,230 

10,312 

471 

87,739.0 

5.37 

5.05 

34 

92,725 

10,673 

497 

93,209.0 

5.33 

5.20 

35 

93,621 

10,342 

505 

94,418.0 

5.35 

5.33 

36 

93,117 

9,843 

501 

94,161.5 

5.32 

5.45 

37 

93,972 

9,689 

528 

95,103.5 

5.55 

5.56 

38 

93,945 

9,226 

548 

94,723.0 

5.79 

5.70 

39 

90,762 

8,641 

533 

91,630.0 

5.82 

5.86 

40 

90,414 

8,391 

541 

91,508.5 

5.91 

6.07 

41 

90,438 

8,199 

605 

91,958.5 

6.58 

6.33 

42 

93,203 

8,110 

613 

94,648.5 

6.48 

6.64 

43 

95,107 

7,870 

689 

96,482.5 

7.15 

6.98 

44 

95,515 

7,632 

673 

96,553.0 

6.97 

7.37 

45 

90,504 

7,291 

754 

92,383.0 

8.16 

7.79 

46 

84,683 

6,662 

735 

87,175.5 

8.43 

8.24 

47 

79,414 

5,821 

682 

81,458.0 

8.37 

8.73 

48 

72,740 

5,098 

731 

74,607.5 

9.80 

9.28 

49 

66,042 

4,594 

683 

67,717.0 

10.09 

9.92 

50 

59,284 

4,051 

614 

61,071.0 

10.05 

10.67 

51 

51,645 

3,445 

616 

53,662.0 

11.48 

11.55 

52 

45,285 

2,712 

583 

46,962.0 

12.41 

12.59 

53 

40,831 

2,330 

587 

42,348.0 

13.86 

13.80 

54 

36,839 

2,390 

579 

38,341.0 

15.10 

15.17 

55 

31,096 

2,164 

556 

32,664.5 

17.02 

16.71 

56 

26,397 

1,938 

502 

27,826.5 

18.04 

18.39 

57 

22,905 

1,645 

509 

24,219.0 

21.02 

20.18 

57 

20,555 

1,539 

465 

21,780.0 

21.45 

22.07 

58 

18,611 

1,410 

443 

19,747.5 

22.43 

24.07 

60 

16,761 

1,153 

529 

17,854.0 

29.63 

26.21 

129 


FORTY-THREE  SOCIETIES.— Continued. 


Unadjusted 

Adjusted 

Ages. 

Existing. 

Lapses. 

Deaths. 

Exposures. 

Death  Rate 
per  1000. 

Death  Rate 
per  1000. 

61 

14,998 

1,063 

445 

15,968.0 

27.87 

28.53 

62 

13,482 

856 

460 

14,361.5 

32.03 

31.06 

63 

12,029 

826 

392 

12,830.5 

30.55 

33.88 

64 

10,453 

721 

423 

11,234.5 

37.65 

37.00 

65 

8,312 

597 

357 

8,965.5 

39.82 

40.40 

66 

7,066 

554 

347 

7,686.0 

45.15 

43.99 

67 

5,857 

528 

317 

6,435.0 

49.26 

47.70 

68 

4,864 

513 

290 

5,406.5 

53.64 

51.54 

69 

4,206 

449 

247 

4,676.0 

52.82 

55.76 

70 

3,652 

403 

250 

4,103.0 

60.93 

60.85 

71 

3,089 

388 

260 

3,543.0 

73.38 

67.22 

72 

2,654 

325 

214 

3,027.5 

70.69 

75.12 

73 

2,147 

228 

174 

2,436.0 

71.43 

84.07 

74 

1,753 

198 

172 

2,026.0 

84.90 

93.55 

75 

1,142 

149 

144 

1,360.5 

105.84 

102.55 

76 

826 

99 

115 

990.5 

116.10 

110.28 

77 

554 

69 

96 

684.5 

140.25 

115.98 

78 

418 

49 

72 

514.5 

139.94 

120.26 

79 

325 

27 

46 

384.0 

119.79 

123.62 

80 

200 

11 

22 

227.5 

96.70 

127.68 

81 

136 

8 

21 

161.0 

130.43 

133.48 

82 

81 

9 

13 

100.5 

129.35 

142.65 

83 

73 

3 

18 

90.5 

198.89 

155.47 

84 

16 

1 

2 

18.5 

108.11 

172.11 

85 

4 

3 

7.0 

428.57 

191.00 

86 

1 

1 

2.0 

500.00 

211.55 

87 

6 

6.0 

232.48 

88 

3 

3.0 

253.40 

89 

2 

2.0 

273.76 

90 

1 

1.0 

294.17 

91 

314.72 

92 

335.96 

93 

357.74 

94 

380.02 

95 

404.33 

96 

431.47 

97 

462.18 

98 

495.12 

99 

531.29 

100 

581.73 

101 

666.67 

102 

1,000.00 

2,843,218 

332,466 

25,125 

2,880,166.5 

130 
FORTY-THREE  SOCIETIES. 


Age. 

Unadjusted. 

Adjusted. 

Ix. 

dx. 

Ix. 

dx. 

qx. 

px. 

17 

100,000 

184 

100,000 

464 

.00464 

.99536 

18 

99,816 

365 

99,536 

462 

.00466 

.99534 

19 

99,451 

461 

99,074 

464 

.00468 

.99532 

20 

98,990 

469 

98,610 

465 

.00471 

.99529 

21 

98,521 

477 

98,145 

464 

.00473 

.99527 

22 

98,044 

415 

97,681 

462 

.00474 

.99526 

23 

97,629 

504 

97,219 

458 

.00471 

.99529 

24 

97,125 

446 

96,761 

451 

.00466 

.99534 

25 

96,679 

487 

96,310 

443 

.00459 

.99541 

26 

96,192 

424 

95,867 

434 

.00452 

.99548 

27 

95,768 

405 

95,433 

427 

.00447 

.99553 

28 

95,363 

418 

95,006 

424 

.00446 

.99554 

29 

94,945 

411 

94,582 

426 

.00450 

.99550 

30 

94,534 

421 

94,156 

432 

.00460 

.99540 

31 

94,113 

443 

93,724 

444 

.00473 

.99527 

32 

93,670 

465 

93,280 

454 

.00489 

.99511 

33 

93,205 

501 

92,826 

469 

.00505 

.99495 

34 

92,704 

494 

92,357 

479 

.00520 

.99480 

35 

92,210 

493 

91,878 

490 

.00533 

.99467 

36 

91,717 

489 

91,388 

497 

.00545 

.99455 

37 

91,228 

507 

90,891 

505 

.00556 

.99444 

38 

90,721 

524 

90,386 

515 

.00570 

.99430 

39 

90,197 

524 

89,871 

526 

.00586 

.99414 

40 

89,673 

529 

89,345 

542 

.00607 

.99393 

41 

89,144 

588 

88,803 

562 

.00633 

.99367 

42 

88,556 

565 

88,241 

585 

.00664 

.99336 

43 

87,991 

638 

87,656 

612 

.00698 

.99302 

44 

87,353 

609 

87,044 

641 

.00737 

.99263 

45 

86,744 

708 

86,403 

674 

.00779 

.99221 

46 

86,036 

726 

85,729 

705 

.00824 

.99176 

47 

85,310 

714 

85,024 

743 

.00873 

.99127 

48 

84,596 

830 

84,281 

782 

.00928 

.99072 

49 

83,766 

844 

83,499 

829 

.00992 

.99008 

50 

82,922 

834 

82,670 

882 

.01067 

.98933 

51 

82,088 

941 

81,788 

945 

.01155 

,98845 

52 

81,147 

1,007 

80,843 

1,018 

.01259 

.98741 

53 

80,140 

1,110 

79,825 

,100 

.01380 

.98620 

54 

79,030 

,194 

78,725 

,195 

.01517 

.98483 

55 

77,836 

,326 

77,530 

,296 

.01671 

.98329 

56 

76,510 

,381 

76,234 

,402 

.01839 

.98161 

57 

75,129 

,579 

74,832 

,509 

.02018 

.97982 

58 

73,550 

,579 

73,323 

,618 

.02207 

.97793 

59 

71,971 

,614 

71,705 

,726 

.02407 

.97593 

60 

70,357 

2,084 

69,979 

,833 

.02621 

.97379 

131 


FORTY-THREE  SOCIETIES.— Continued. 


Age. 

Unadjusted. 

Adjusted. 

Ix. 

dx. 

Ix. 

dx. 

qx. 

px. 

61 

68,273 

1,903 

68,146 

1,944 

.02853 

.97147 

62 

66,370 

2,126 

66,202 

2,056 

.03106 

.96894 

63 

64,244 

1,962 

64,146 

2,173 

.03388 

.96612 

64 

62,282 

2,346 

61  ,973 

2,293 

.03700 

.96300 

65 

59,936 

2,387 

59,680 

2,511 

.04040 

.95960 

66 

57,549 

2,597 

57,269 

2,518 

.04399 

.95601 

67 

54,952 

2,708 

54,751 

2,612 

.04770 

.95230 

68 

52,244 

2,802 

52,139 

2,687 

.05154 

.94846 

69 

49,442 

2,611 

49,452 

2,758 

.05576 

.94424 

70 

46,831 

2,854 

46,694 

2,841 

.06085 

.93915 

71 

43,977 

3,227 

43,853 

2,948 

.06722 

.93278 

72 

40,750 

2,880 

40,905 

3,072 

.07512 

.92488 

73 

37,870 

2,706 

37,833 

3,181 

.08407 

.91593 

74 

35,164 

2,985 

34,652 

3,242 

.09355 

.90645 

75 

32,179 

3,406 

31,410 

3,221 

.  10255 

.89745 

76 

28,773 

3,340 

28,189 

3,109 

.11028 

.88972 

77 

25,433 

3,567 

25,080 

2,909 

.11598 

.88402 

78 

21,866 

3,060 

22,171 

2,666 

.  12026 

.87974 

79 

18,806 

2,630 

19,505 

2,412 

.  12362 

.87638 

80 

16,176 

1,224 

17,093 

2,182 

.  12768 

.87232 

81 

14,952 

1,950 

14,911 

,990 

.13348 

.86652 

82 

13,002 

1,682 

12,921 

,843 

.14265 

.85735 

83 

11,320 

2,251 

11.078 

,722 

.15547 

.84453 

84 

9,069 

4,447 

9,356 

,611 

.17211 

.82789 

85 

4,622 

2,311 

7,745 

,479 

.19100 

.80900 

86 

2,311 

6,266 

,325 

.21155 

.78845 

87 

4,491 

,149 

.23248 

.76752 

88 

3,792 

961 

.25340 

.74660 

89 

2,831 

775 

.27376 

.72624 

90 

2,056 

605 

.29417 

.70583 

91 

1,451 

457 

.31472 

.68528 

92 

994 

334 

.33596 

.66404 

93 

660 

236 

.35774 

.64226 

94 

424 

161 

.38002 

.61998 

95 

263 

106 

.40433 

.59567 

96 

157 

68 

.43147 

.56853 

97 

89 

41 

.46218 

.53782 

98 

48 

24 

.49512 

.50488 

99 

24 

13 

.53129 

.46871 

100 

11 

6 

.58173 

.41827 

101 

5 

3 

.66667 

.33333 

102 

2 

2 

1.00000 

.00000 

97,689 

100,000 

NOTE — lx  =  Number  Living. 
dx  =  Number  Dying. 


qx  =  Probability  of  Dying. 
px  =  Probability  of  Living. 


132 
FORTY-THREE  SOCIETIES. 


Ages. 

Actual 
Deaths. 

Expected  Deaths  by 
Adjusted. 

Plus. 

Minus. 

Accumulated 
Error. 

17 

1 

3 

2 

+  2 

18 

30 

38 

8 

+10 

19 

96 

97 

1 

+11 

20 

139 

138 

1 

+10 

21 

182 

177 

5 

+  5 

22 

192 

215 

23 

+28 

23 

264 

241 

23 

+  5 

24 

266 

270 

4 

+  9 

25 

314 

286 

28 

-19 

26 

292 

299 

7 

-12 

27 

300 

318 

18 

+  6 

28 

334 

340 

6 

+  12 

29 

343 

359 

16 

+28 

30 

365 

377 

12 

+40 

31 

402 

403 

1 

+41 

32 

432 

426 

6 

+35 

33 

471 

443 

28 

+  7 

34 

497 

485 

12 

-  5 

35 

505 

503 

2 

-  7 

36 

501 

512 

11 

+  4 

37 

528 

529 

1 

+  5 

38 

548 

540 

8 

-  3 

39 

533 

537 

4 

+  1 

40 

541 

556 

15 

+16 

41 

605 

582 

23 

-  7 

42 

613 

628 

15 

+  8 

43 

689 

673 

16 

-  8 

44 

673 

712 

39 

+31 

45 

754 

719 

35 

-  4 

46 

735 

718 

17 

-21 

47 

682 

711 

29 

+  8 

48 

731 

692 

39 

-31 

49 

683 

671 

12 

-43 

50 

614 

652 

38 

-  5 

51 

616 

620 

4 

-  1 

52 

583 

591 

8 

+  7 

53 

587 

584 

3 

+  4 

54 

579 

582 

3 

+  7 

55 

556 

546 

10 

-  3 

56 

502 

512 

10 

+  7 

57 

509 

489 

20 

-13 

58 

465 

478 

13 

0 

59 

443 

475 

32 

+32 

60 

529 

468 

61 

-29 

133 


FORTY-THREE  SOCIETIES.— Continued. 


Ages. 

Actual 
Deaths. 

Expected  Deaths  by 
Adjusted. 

Plus. 

Minus. 

Accumulated 
Error. 

61 

445 

456 

11 

-18 

62 

460 

446 

14 

-32 

63 

392 

435 

43 

+  11 

64 

423 

416 

7 

+  4 

65 

357 

362 

5 

+  9 

66 

347 

338 

9 

0 

67 

317 

307 

10 

-10 

68 

290 

279 

11 

-21 

69 

247 

261 

14 

-  7 

70 

250 

250 

-  7 

71 

260 

238 

22 

-29 

72 

214 

227 

13 

-16 

73 

174 

205 

31 

+15 

74 

172 

190 

18 

+33 

75 

144 

140 

4 

+29 

76 

115 

109 

6 

+23 

77 

96 

79 

17 

+  6 

78 

72 

62 

10 

4 

79 

46 

47 

1 

-  3 

80 

22 

29 

7 

+  4 

81 

21 

21 

+  4 

82 

13 

14 

1 

+  5 

83 

18 

14 

4 

+  1 

84 

2 

3 

1 

+  2 

85 

3 

1 

2 

0 

89 

1 

1 

0 

25,125 

25,125 

465 

465 

134 
MEN. 

Ages. 

Exposures. 

Unadjusted 
Death  Rate 
Per  1000. 

Adjusted 
Death  Rate 
Per  1000. 

Living. 

Dying. 

16 

112.0 

17 

365.5 

2.74 

4.35 

100,000 

434 

18 

4,145.0 

4.58 

4.40 

99,566 

439 

19 

12,025.0 

4.99 

4.47 

99,127 

445 

20 

18,451.5 

5.20 

4.54 

98,682 

448 

21 

24,819.5 

4.43 

4.60 

98,234 

452 

22 

31,667.0 

4.23 

4.61 

97,782 

451 

23 

35,936.0 

4.98 

4.58 

97,331 

445 

24 

41,224.0 

4.37 

4.51 

96,886 

436 

25 

44,531.5 

4.85 

4.41 

96,450 

426 

26 

47,484.5 

4.17 

4.32 

96,024 

415 

27 

51,358.5 

4.05 

4.26 

95,609 

406 

28 

55,206.0 

4.18 

4.25 

95,203 

405 

29 

57,805.5 

4.26 

4.30 

94,798 

407 

30 

59,628.0 

4.11 

4.40 

94,391 

417 

31 

62,105.5 

4.23 

4.54 

93,974 

427 

32 

63,670.0 

5.04 

4.70 

93,547 

440 

33 

64,011.5 

5.37 

4.86 

93  ,  107 

454 

34 

68,240.5 

5.06 

5.02 

92,653 

466 

35 

69,484.0 

5.20 

5.16 

92,187 

476 

36 

69,425.0 

5.06 

5.30 

91,711 

487 

37 

70,378.0 

5.44 

5.45 

91,224 

496 

38 

70,274.5 

5.49 

5.63 

90,728 

511 

39 

67,585.0 

5.80 

5.85 

90,217 

528 

40 

68,031.5 

6.03 

6.11 

89,689 

547 

41 

68,628.5 

6.70 

6.42 

89,142 

573 

42 

71,075.5 

6.63 

6.77 

88,569 

600 

43 

72,613.5 

7.19 

7.14 

87,969 

628 

44 

72,803.0 

7.20 

7.53 

87,341 

657 

45 

69,887.5 

8.16 

7.93 

86,684 

688 

46 

65,994.5 

8.83 

8.37 

85,996 

719 

47 

61,665.0 

8.64 

8.85 

85,277 

755 

48 

56,573.0 

9.49 

9.41 

84,522 

796 

49 

50,715.5 

10.08 

10.10 

83,726 

846 

50 

45,485.5 

10.44 

10.94 

82,880 

907 

51 

39,736.0 

12.06 

11.94 

81,973 

980 

52 

34,513.0 

12.84 

13.11 

80,993 

1,061 

53 

31,110.0 

13.92 

14.45 

79,932 

1,155 

54 

27,440.0 

16.44 

15.94 

78,777 

1,256 

55 

23,699.5 

18.14 

17.57 

77.521 

1,362 

56 

20,204.0 

19.01 

19.29 

76,159 

1,469 

57 

17,975.0 

22.48 

21.11 

74,690 

1,578 

58 

16,894.5 

21.90 

23.00 

73,112 

1,682 

59 

15,961.0 

22.43 

25.00 

71,430 

1,787 

60      ' 

14,773.5 

30.93 

27.11 

69,643 

1,888 

135 
MEN. — Continued. 


Ages. 

Exposures. 

Unadjusted 
Death  Rate 
Per  1000. 

Adjusted 
Death  Rate 
Per  1000. 

Living. 

Dying. 

61 

13,377.5 

28.93 

29.43 

67,755 

1,994 

62 

12,077.0 

33.45 

31.93 

65,761 

2,099 

63 

10,847.5 

31.43 

34.71 

63,662 

2,209 

64 

9,646.5 

37.84 

37.74 

61,453 

2,320 

65 

7,826.5 

40.25 

41.01 

59,133 

2,426 

66 

6,808.0 

46.42 

44.45 

56,707 

2,521 

67 

5,751.0 

49.73 

48.03 

54,186 

2,603 

68 

4,830.0 

54.45 

51.78 

51,583 

2,670 

69 

4,206.5 

52.78 

55.98 

48,913 

2,739 

70 

3,711.0 

60.09 

61.20 

46,174 

2,826 

71 

3,224.5 

73.81 

67.92 

43,348 

2,944 

72 

2,714.0 

71,85 

76.42 

40,404 

3,088 

73 

2,184.0 

74.18 

86.21 

37,316 

3,217 

74 

1,813.5 

89.33 

96.75 

34,099 

3,299 

75 

1,209.0 

107.53 

107.04 

30,800 

3.297 

76 

851.5 

117.44 

116.30 

27,503 

3,199 

77 

570.5 

154.24 

123.71 

24,304 

3,006 

78 

395.5 

144.12 

129.60 

21,298 

2,761 

79 

268.0 

138.06 

134.13 

18,537 

2,486 

80 

163.5 

97.86 

138.36 

16,051 

2,221 

81 

112.0 

133.93 

142.83 

13,830 

1,975 

82 

46.5 

150.54 

148.77 

11,855 

1,763 

83 

50.0 

200.00 

156.59 

10,091 

1,581 

84 

7.0 

130.29 

166.75 

8,511 

1,419 

85 

2.0 

178.37 

7,092 

1,265 

86 

1.0 

191.36 

5.827 

1,115 

87 

1.0 

205.12 

4,712 

967 

88 

219.72 

3,745 

822 

89 

1.0 

234.64 

2,923 

686 

90 

1.0 

250.26 

2,237 

560 

91 

266.29 

1,677 

447 

92 

282.72 

1,230 

347 

93 

298.90 

883 

264 

94 

314.34 

619 

195 

95 

352.94 

424 

150 

96 

484.93 

274 

133 

97 

608.50 

141 

86 

98 

,. 

807.50 

55 

14 

99 

1,000.00 

11 

11 

2,128,410.0 

100,000 

136 


MEN. 


Ages. 

Actual  Deaths. 

Expected  Deaths  by 
Adjusted. 

Plus. 

Minus. 

Accumulated  Error. 

17 

1 

2 

1 

+  1 

18 

19 

18 

1 

0 

19 

60 

54 

6 

-  6 

20 

96 

84 

12 

-18 

21 

110 

114 

4 

-14 

22 

134 

146 

12 

-  2 

23 

179 

165 

14 

-16 

24 

180 

186 

6 

-10 

25 

216 

196 

20 

-30 

26 

198 

205 

7 

-23 

27 

208 

219 

11 

-12 

28 

231 

235 

4 

-  8 

29 

246 

249 

3 

-  5 

30 

245 

263 

18 

+13 

31 

263 

282 

19 

+32 

32 

321 

299 

22 

+10 

33 

344 

311 

33 

-23 

34 

345 

342 

3 

-26 

35 

361 

359 

2 

-28 

36 

351 

368 

17 

-11 

37 

383 

383 

-11 

38 

386 

396 

10 

-  1 

39 

392 

395 

3 

+  2 

40 

410 

411 

6 

+  8 

41 

460 

441 

19 

-11 

42 

471 

481 

10 

-  1 

43 

522 

518 

4 

-  5 

44 

524 

548 

24 

+19 

45 

570 

554 

16 

+  3 

46 

583 

552 

31 

-28 

47 

533 

546 

13 

-15 

48 

537 

532 

5 

-20 

49 

511 

512 

1 

-19 

50 

475 

497 

22 

+  3 

51 

479 

474 

5 

-  2 

52 

443 

453 

10 

+  8 

53 

433 

450 

17 

+25 

54 

451 

437 

14 

+11 

55 

430 

416 

14 

-  3 

56 

384 

390 

6 

+  3 

57 

404 

380 

24 

-21 

58 

370 

389 

19 

-  2 

59 

358 

399 

41 

+39 

60 

457 

401 

56 

-17 

137 


MEN. — Continued. 


Ages. 

Actual  Deaths. 

Expected  Deaths  by 
Adjusted. 

Plus. 

Minus. 

Accumulated  Error. 

61 

387 

394 

7 

-10 

62 

404 

386 

18 

-28 

63 

341 

377 

36 

+  8 

64 

365 

364 

1 

+  7 

65 

315 

321 

6 

+13 

66 

316 

303 

13 

0 

67 

286 

276 

10 

-10 

68 

263 

256 

7 

-17 

69 

222 

235 

13 

-  4 

70 

223 

227 

4 

0 

71 

238 

219 

19 

-19 

72 

195 

207 

12 

-  7 

73 

162 

188 

26 

+19 

74 

162 

175 

13 

+32 

75 

130 

129 

1 

+31 

76 

100 

99 

1 

+30 

77 

88 

71 

17 

+13 

78 

57 

51 

6 

+  7 

79 

37 

36 

1 

+  6 

80 

16 

23 

7 

+13 

81 

15 

16 

1 

+14 

82 

7 

7 

+14 

83 

10 

8 

2 

+12 

84 

1 

1 

+12 

19,414 

19,426 

409 

397 

138 
WOMEN. 


Ages. 

Exposures. 

Unadjusted 
Death  Rate 
Per  1000. 

Adjusted 
Death  Rate 
Per  1000. 

Living. 

Dying. 

16 

.5 

17 

64.0 

5.35 

5.43 

100,000 

543 

18 

1,139.0 

6.15 

5.41 

99,457 

538 

19 

3,176.0 

5.35 

5.40 

98,919 

534 

20 

4,162.5 

4.56 

5.39 

98,385 

531 

21 

5,060.5 

6.32 

5.42 

97,854 

530 

22 

5,570.0 

3.77 

5.46 

97,324 

532 

23 

6,648.5 

6.92 

5.49 

96,792 

531 

24 

7,562.0 

5.42 

5.49 

96,261 

528 

25 

8,474.0 

6.25 

5.48 

95,733 

526 

26 

8,926.5 

4.93 

5.46 

95,207 

520 

27 

9,716.0 

4.63 

5.47 

94,687 

518 

28 

10,484.0 

5.82 

5.51 

94,169 

519 

29 

11,038.0 

5.80 

5.60 

93,650 

524 

30 

11,451.5 

5.33 

5.70 

93,126 

530 

31 

11,768.5 

6.88 

5.80 

92,596 

538 

32 

11,976.0 

5.59 

5.88 

92,058 

541 

33 

12,367.0 

5.26 

5.93 

91,517 

542 

34 

12,964.0 

6.17 

5.94 

90,975 

541 

35 

13,050.0 

6.13 

5.93 

90,434 

536 

36 

12,786.5 

6.10 

5.93 

89,898 

532 

37 

12,791.5 

5.55 

5.93 

89,366 

530 

38 

12,765.0 

6.66 

5.95 

88,836 

528 

39 

12,561.5 

5.25 

6.01 

88,308 

531 

40 

12,223.5 

5.73 

6.08 

87,777 

534 

41 

12,012.5 

6.58 

6.14 

87,243 

535 

42 

11,737.0 

6.56 

6.22 

86,708 

539 

43 

11,845.0 

6.50 

6.32 

86,169 

544 

44 

11,501.5 

5.83 

6.44 

85,625 

552 

45 

10,844.5 

7.50 

6.61 

85,073 

563 

46 

10,046.5 

6.07 

6.90 

84,510 

583 

47 

9,170.0 

6.11 

7.36 

83,927 

618 

48 

8,190.5 

9.40 

7.97 

83,309 

665 

49 

7,655.0 

9.27 

8.66 

82,644 

716 

50 

6,484.5 

7.86 

9.38 

81,928 

768 

51 

5,462.0 

10.44 

10.07 

81,160 

818 

52 

4,629.5 

10.37 

10.61 

80,342 

852 

53 

3,933.5 

14.75 

11.08 

79,490 

881 

54 

3,602.0 

11.94 

11.63 

78,609 

932 

55 

2,731.5 

8.05 

12.58 

77,677 

960 

56 

2,473.5 

14.55 

14.17 

76,717 

1,088 

57 

1,919.5 

17.71 

16.49 

75,629 

1,247 

58 

1,388.5 

15.12 

19.35 

74,382 

1,440 

59 

987.0 

21.28 

22.36 

72,942 

1,630 

60 

668.5 

28.42 

25.13 

71,312 

1,792 

139 
WOMEN.— Continued. 


Ages. 

Exposures. 

Unadjusted 
Death  Rate 
Per  1000. 

Adjusted 
Death  Rate 
Per  1000. 

Living. 

Dying. 

61 

496.0 

30.24 

27.24 

69,520 

1,893 

62 

475.5 

35.75 

28.65 

67,627 

1,937 

63 

449.5 

24.47 

29.54 

65,690 

1,940 

64 

311.0 

25.72 

30.42 

63,750 

1,940 

65 

244.5 

32.72 

31.72 

61,810 

1,961 

66 

146.5 

6.83 

33.74 

59,849 

2,019 

67 

70.0 

28.57 

36.57 

57,830 

2,115 

68 

21.0 

40.10 

55,715 

2,234 

69 

1.0 

44.19 

53,481 

2,363 

70 

48.65 

51,118 

2,488 

71 

2.0 

53.38 

48,630 

2,596 

72 

58.38 

46,034 

2,687 

73 

1.0 

63.78 

43,347 

2,764 

74 

69.57 

40,583 

2,824 

75 

1.0 

75.74 

37,759 

2,860 

76 

82.31 

34,899 

2,872 

77 

89.30 

32,027 

2,860 

78 

96.71 

29,167 

2,821 

79 

104.55 

26,346 

2,754 

80 

112.83 

23,592 

2,662 

81 

121.56 

20,930 

2,544 

82 

130.74 

18,386 

2,404 

83 

140.39 

15,982 

2,244 

84 

150.51 

13,738 

2,067 

85 

161.12 

11,671 

1,881 

86 

172.24 

9,790 

1,686 

87 

183.88 

8,104 

1,490 

88 

196.06 

6,614 

1,297 

89 

208.79 

5,317 

1,110 

90 

- 

222.08 

4,207 

934 

91 

235.96 

3,273 

773 

92 

250.44 

2,500 

626 

93 

276.20 

1,874 

517 

94 

309.45 

1,357 

420 

95 

348.77 

937 

327 

96 

412.92 

610 

252 

97 

504.89 

358 

181 

98 

634.68 

177 

112 

99 

813.56 

65 

53 

100 

1,000.00 

12 

12 

348,228.0 

100,000 

140 
WOMEN. 


Ages. 

Actual  Deaths. 

Expected  Deaths 
by  Adjusted. 

Plus. 

Minus. 

Accumulated 
Error. 

18 

7 

6 

1 

-    1 

19 

17 

17 

-    1 

20 

19 

22 

3 

+  2 

21 

32 

27 

5 

-  3 

22 

21 

30 

9 

+  6 

23 

46 

37 

9 

-  3 

24 

41 

41 

-  3 

25 

53 

46 

7 

-10 

26 

44 

49 

5 

-  5 

27 

45 

53 

8 

+  3 

28 

61 

58 

3 

0 

29 

64 

62 

2 

-  2 

30 

61 

65 

4 

+  2 

31 

81 

68 

13 

-11 

32 

67 

70 

3 

-  8 

33 

65 

73 

8 

0 

34 

80 

77 

3 

-  3 

35 

80 

77 

3 

-  6 

36 

78 

76 

2 

-  8 

37 

71 

76 

5 

-  3 

38 

85 

76 

9 

-12 

39 

66 

76 

10 

-  2 

40 

70 

74 

4 

+  2 

41 

79 

74 

5 

-  3 

42 

77 

73 

4 

-  7 

43 

77 

75 

2 

-  9 

44 

67 

74 

7 

-  2 

45 

81 

71 

10 

-12 

46 

61 

69 

8 

A 

47 

56 

67 

11 

+  7 

48 

77 

65 

12 

-  5 

49 

71 

66 

5 

-10 

50 

51 

61 

10 

0 

51 

57 

55 

2 

-  2 

52 

48 

49 

1 

-  1 

53 

58 

44 

14 

-15 

54 

43 

42 

1 

-16 

55 

22 

34 

12 

—  4 

56 

36 

35 

1 

-  5 

57 

34 

32 

2 

-  7 

58 

21 

27 

6 

-  1 

59 

21 

22 

1 

0 

60 

19 

17 

2 

-  2 

61 

15 

14 

1 

-  3 

62 

17 

14 

3 

-  6 

53 

11 

13 

2 

—  4 

64 

8 

9 

1 

-  3 

65 

8 

8 

-  3 

66 

1 

5 

4 

67 

2 

3 

1 

+  1 

4-  2 

2,372 

2,374 

123 

121 

~  * 

141 
MEN  AND  WOMEN. 


Ages. 

Exposures. 

Unadjusted 
Death  Rate 
Per  1000. 

Adjusted 
Death  Rate 
Per  1000. 

Living. 

Dying. 

16 

54.5 

17 

110.0 

4.23 

100,000 

423 

18 

2,904.5 

1.38 

4.21 

99,577 

418 

19 

5,490.0 

3.46 

4.25 

99,159 

422 

20 

6,773.0 

3.54 

4.33 

98,737 

426 

21 

7,575.5 

5.28 

4.44 

98,311 

436 

22 

8,163.5 

4.53 

4.56 

97,875 

448 

23 

8,482.5 

4.60 

4.67 

97,427 

454 

24 

9,223.5 

4.88 

4.71 

96,973 

457 

25 

9,335.5 

4.82 

4.69 

96,516 

452 

26 

9,708.0 

5.15 

4.62 

96,064 

444     . 

27 

10,088.0 

4.66 

4.53 

95,620 

432 

28 

10,612.0 

3.96 

4.46 

95,188 

425 

29 

10,829.0 

3.05 

4.44 

94,763 

420 

30 

10,937.5 

5.39 

4.50 

94,343 

425 

31 

11,362.5 

5.10 

4.66 

93,918 

438 

32 

11,561.0 

3.81 

4.90 

93,480 

457 

33 

11,360.5 

5.46 

5.19 

93,023 

483 

34 

12,004.5 

6.00 

5.47 

92,540 

506 

35 

11,884.0 

5.39 

5.72 

92,034 

526 

36 

11,950.0 

6.03 

5.90 

91,508 

540 

37 

11,934.0 

6.20 

5.99 

90,968 

545 

38 

11,683.5 

6.59 

6.01 

90,423 

544 

39 

11,483.5 

6.53 

6.02 

89,879 

540 

40 

11,253.5 

5.42 

6.06 

89,339 

542 

41 

11,317.5 

5.83 

6.19 

88,797 

550 

42 

11,836.0 

5.49 

6.46 

88,247 

569 

43 

12,024.0 

7.49 

6.88 

87,678 

604 

44 

12,248.5 

6.69 

7.42 

87,074 

645 

45 

11,651.0 

8.84 

8.03 

86,429 

694 

46 

11,134.5 

8.17 

8.63 

85,735 

739 

47 

10,623.0 

8.76 

9.18 

84,996 

781 

48 

9,844.0 

11.89 

9.65 

84,215 

812 

49 

9,346.5 

10.81 

10.06 

83,403 

839 

50 

9,101.0 

9.67 

10.47 

82,564 

864 

51 

8,464.0 

9.45 

10.98 

81,700 

897 

52     . 

7,819.5 

11.77 

11.67 

80,803 

943 

53 

7,304.5 

13.09 

12.59 

79,860 

,005 

54 

7,299.0 

11.65 

13.72 

78,855 

,082 

55 

•6,233.5 

16.68 

14.95 

77,773 

,162 

56 

5,149.0 

15.93 

16.21 

76,611 

,242 

57 

4,324.5 

16.42 

17.45 

75,369 

,316 

58 

3,497.0 

21.16 

18.66 

74,053 

,382 

59 

2,799.5 

22.86 

20.00 

72,671 

,453 

60 

2,412.0 

21.97 

21.58 

71,218 

,536 

142 


MEN  AND  WOMEN.— Continued. 


Ages. 

Exposures. 

Unadjusted 
Death  Rate. 
Per  1000. 

Adjusted 
Death  Rate. 
Per  1000. 

Living. 

Dying. 

61 

2,094.5 

20.53 

23.57 

69,682 

1,643 

62 

1,809.0 

21.71 

26.11 

68,039 

1,776 

63 

1,533.5 

26.08 

29.35 

66,263 

1,945 

64 

1,277.0 

39.15 

33.34 

64,318 

2,145 

65 

894.5 

38.01 

37.94 

62,173 

2,359 

66 

731.5 

41.01 

42.66 

59,814 

2,552 

67 

614.0 

47.23 

47.11 

57,262 

2,698 

68 

555.5 

48.61 

50.94 

54,564 

2,779 

69 

468.5 

53.36 

54.06 

51,785 

2,800 

70 

392.0 

68.88 

56.74 

48,985 

2,780 

71 

316.5 

69.51 

59.53 

46,205 

2,751 

72  • 

313.5 

60.61 

62.79 

43,454 

2,728 

73 

251.0 

47.81 

66.74 

40,726 

2,718 

74 

212.5 

47.06 

71.02 

38,008 

2,699 

75 

150.5 

93.02 

75.55 

35,309 

2,668 

76 

139.0 

107.91 

80.46 

32,641 

2,627 

77 

114.0 

70.18 

85.96 

30,014 

2,579 

78 

119.0 

126.05 

92.47 

27,435 

2,537 

79 

116.0 

77.59 

100.89 

24,898 

2,512 

80 

64.0 

93.75 

111.82 

22,386 

2,504 

81 

49.0 

122.45 

125.65 

19,882 

2,498 

82 

54.0 

111.11 

.      142.34 

17,384 

2,474 

83 

40.5 

197.53 

161.20 

14,910 

2,403 

84 

11.5 

86.96 

181.49 

12,507 

2,270 

85 

5.0 

600.00 

202.16 

10,237 

2,070 

86 

1.0 

1,000.00 

222.33 

8,167 

1,815 

87 

5.0 

241.80 

6,352 

1,536 

88 

3.0 

261.11 

4,816 

1,257 

89 

1.0 

280.86 

3,559 

1,000 

90 

301  .  75 

2,559 

772 

91 

. 

323.86 

1,787 

579 

92 

346.56 

1,208 

419 

93 

368.80 

789 

291 

94 

398.00 

498 

198 

95 

323.73 

300 

97 

96 

359.82 

203 

73 

97 

396.76 

130 

52 

98 

533.33 

78 

41 

99 

581.43 

37 

22 

100 

666.67 

15 

10 

101 

1,000.00 

5 

5 

403,528.5 

100,000 

143 
MEN  AND  WOMEN. 


Ages. 

Actual  Deaths. 

Expected  Deaths  by 
Adjusted. 

Plus. 

Minus. 

Accumulated  Error. 

18 

4 

12 

8 

+  8 

19 

19 

23 

4 

+  12 

20 

24 

29 

5 

+  17 

21 

40 

34 

6 

+  11 

22 

37 

37 

+  11 

23 

39 

40 

1 

+  12 

24 

45 

43 

2 

+10 

25 

45 

44 

1 

+  9 

26 

50 

45 

5 

+  4 

27 

47 

46 

1 

+  3 

28 

42 

47 

5 

+  8 

29 

33 

48 

15 

+28 

30 

59 

49 

10 

+13 

31 

58 

53 

5 

+  8 

32 

44 

57 

13 

+21 

33 

62 

59 

3 

+18 

34 

72 

66 

6 

+  12 

35 

64 

68 

4 

+16 

36 

72 

70 

2 

+  14 

37 

74 

71 

3 

+  11 

38 

77 

70 

7 

+  4 

39 

75 

69 

6 

-  2 

40 

61 

68 

7 

+  5 

41 

66 

70 

4 

+  9 

42 

65 

76 

11 

+20 

43 

90 

82 

8 

+  12 

44 

82 

91 

9 

+21 

45 

103 

94 

9 

+12 

46 

91 

96 

-  5 

+tf- 

47 

93 

97 

4 

+21 

48 

117 

95 

22 

-   1 

49 

101 

94 

7 

-  8 

50 

88 

95 

7 

-  1 

51 

80 

93 

13 

+  12 

52 

92 

91 

1 

+  11 

53 

96 

92 

4 

+  7 

54 

85 

100 

15 

+22 

55 

104 

93 

11 

+  11 

56 

82 

83 

1 

+12 

57 

71 

75 

4 

+16 

58 

74 

65 

9 

+  7 

59 

64 

56 

8 

—  1 

60 

53 

52 

1 

-  2 

144 


MEN  AND  WOMEN.— Continued. 


Ages. 

Actual  Deaths. 

Expected  Deaths  by 
Adjusted. 

Plus. 

Minus. 

Accumulated  Error. 

61 

43 

49 

6 

+  4 

62 

39 

47 

8 

+  12 

63 

40 

45 

5 

+  17 

64 

50 

43 

7 

+  10 

65 

34 

34 

+10 

66 

30 

31 

1 

+11 

67 

29 

29 

+  11 

68 

27 

28 

1 

+12 

69 

25 

25 

+  12 

70 

27 

42 

5 

+  7 

71 

22 

19 

3 

+  4 

72 

19 

20 

1 

+  5 

73 

12 

17 

5 

+10 

74 

10 

15 

5 

+15 

75 

14 

11 

3 

+  12 

76 

15 

11 

4 

+  8 

77 

8 

10 

2 

+10 

78 

15 

11 

4 

+  6 

79 

9 

12 

3 

+  9 

80 

6 

7 

1 

+10 

81 

6 

6 

+10 

82 

6 

8 

2 

+12 

83 

8 

7 

1 

+11 

84 

1 

2 

1 

+12 

85 

3 

1 

2 

+10 

86 

1 

1 

+10 

3,339 

3,349 

176 

166 

DEATH  RATES  PER  1000. 


MALES  AND  MIXED  LIVES. 

FEMALES 

Age. 

1 

a 

03 

A 

» 

Ij 

k 

. 

1=1 

d 

at 

w 

03  § 

i  * 

3 

la  "* 

a£ 

vi 

Hj2 

°*.l 

j 

J'B 

c3  § 

• 

a^"1 

§  *> 

.2 

s> 

•3 

|| 

|| 

1 

n 

!-i 

1 

CO 

P 

P 

17 

3.75 

3  38 

7.69 

4.64 

6.55 

18 

3.83 

3  48 

7.73 

4.66 

7.18 

19 

3.92 

3.49 

7.77 

4.68 

7.86 

20 

4^04 

4.28 

3.48 

4.63 

5.00 

7.81 

4.71 

8.56 

4.71 

21 

4.16 

4.27 

3.40 

4.67 

5.04 

7.86 

4.73 

8.79 

4.73 

22 

4.31 

4.25 

3.44 

4.71 

5.07 

7.91 

4.74 

9.00 

4.77 

23 

4.46 

4.25 

3.46 

4.75 

5.11 

7.96 

4.71 

9.21 

4.83 

24 

4.63 

4.25 

3.47 

4.80 

5.15 

8.01 

4.66 

9.41 

4.90 

25 

4.81 

4.26 

3.54 

4.86 

5.20 

8.07 

4.59 

9.61 

4.99 

26 

5.00 

4.28 

3.67 

4.92 

5.26 

8.13 

4.52 

9.80 

5.10 

27 

5.23 

4.32 

3.84 

4.99 

5.32 

8.20 

4.47 

10.00 

5.33 

28 

5.44 

4.37 

3.94 

5.06 

5.39 

8.26 

4.46 

10.19 

5.35 

29 

5.69 

4.44 

4.18 

5.14 

5.47 

8.35 

4.50 

10.38 

5.50 

30 

5.95 

4.53 

4.41 

5.24 

5.55 

8.43 

4.60 

10.57 

5.66 

31 

6.20 

4.64 

4.71 

5.34 

5.65 

8.51 

4.73 

10.76 

5.82 

32 

6.48 

4.77 

4.91 

5.45 

5.75 

8.61 

4.89 

10.96 

6.00 

33 

6.77 

4.92 

5.25 

5.57 

5.87 

8.72 

5.05 

11.16 

6.18 

34 

7.06 

5.10 

5.49 

5.70 

6.00 

8.83 

5.20 

11.37 

6.37 

35 

7.38 

5.29 

5.68 

5.85 

6.15 

8.95 

5.33 

11.58 

6.56 

36 

7.71 

5.52 

5.83 

6.01 

6.31 

9.09 

5.45 

11.80 

6.74 

37 

8.04 

5.78 

6.09 

6.19 

6.49 

9.23 

5.56 

12.03 

6.93 

38 

8.38 

6.07 

6.28 

6.39 

6.70 

9.41 

5.70 

12.26 

7.12 

39 

8.77 

6\  39 

6.62 

6.61 

6.92 

9.59 

5.86 

12.51 

7.31 

40 

9.15 

6.74 

7.02 

6.85 

7.17 

9.79 

6.07 

12.77 

7.49 

41 

9.56 

7.13 

7.47 

7.12 

7.45 

10.01 

6.33 

13.04 

7.68 

42 

10.01 

7.56 

7.91 

7.41 

7.77 

10.25 

6.64 

13.32 

7.86 

43 

10.48 

8.04 

8.38 

7.74 

8.11 

10.52 

6.98 

13.62 

8.05 

44 

10.99 

8.56 

8.80 

8.09 

8.48 

10.83 

7.37 

13.94 

8.25 

45 

11.53 

9.13 

9.20 

8.48 

8.87 

11.16 

7.79 

14.27 

8.46 

46 

12.13 

9.75 

9.59 

8.92 

9.29 

11.56 

8.24 

14.62 

8.69 

47 

12.77 

10.43 

10.06 

9.40 

9.75 

12.00 

8.73 

14.98 

8.94 

48 

13.45 

11.17 

10.55 

9.92 

10.27 

12.51 

9.28 

15.37 

9.22 

49 

14.22 

11.98 

11.03 

10.50 

10.82 

13.11 

9.92 

15.78 

9.55 

50 

15.04 

12.87 

11.50 

11.14 

11.44 

13.78 

10.67 

16.21 

9.92 

51 

15.95 

13.84 

12.08 

11.85 

12.15 

14.54 

11.55 

16.66 

10.35 

52 

16.93 

14.89 

12.54 

12.63 

12.90 

15.39 

12.59 

17.14 

10.86 

53 

17.99 

16.04 

12.99 

13.48 

13.75 

16.33 

13.80 

17.64 

11.44 

54 

19.18 

17.30 

13.58 

14.43 

14.68 

17.40 

15.17 

19.67 

12.13 

55 

20.54 

18.67 

14.28 

15.47 

15.71 

18.57 

16.71 

20.98 

12.92 

56 

21.84 

20.16 

15.15 

16.61 

16.86 

19.89 

18.39 

22.34 

13.94 

57 

23.38 

21.79 

16.16 

17.87 

18.12 

21.34 

20.18 

23.79 

14.90 

58 

25.05 

23.56 

17.36 

19.26 

19.50 

22.94 

22.07 

25.34 

16.12 

59 

26.89 

25.50 

18.63 

20.79 

21.05 

24.72 

24.07 

27.02 

17.50 

60 

28.87 

27.60 

19.94 

22.48 

22.75 

26.69 

26.21 

28.85 

19.08 

61 

31.05 

29.90 

21.47 

24.34 

24.64 

28.89 

28.53 

30.86 

20.86 

62 

33.44 

32.40 

23.31 

26.38 

26.72 

31.29 

31.06 

33.07 

22.86 

DEATH  RATE  PER  1000.— Continued. 


MALES 

FEMALES 

Age. 

.a 
1 

a 

A 

j 

L 

ill 

8 

ih 

a 

m 

|.| 

S  8 

1£ 

§H 

j 

Mg 

g.l 

*A 

II 

11 

a 

ll 

•c  « 
l.i 

1 

"ri 

'•%  1 

X* 

1" 

<& 

03 

o 

|a 

CO 

!* 

i« 

63 

36.03 

35.13 

26.07 

28.63 

29.03 

33.94 

33.88 

35.50 

25.09 

64 

38.86 

38.10 

29.37 

31.10 

31.57 

36.87 

37.00 

38.18 

27.58 

65 

41.96 

41.33 

33.40 

33.82 

34.39 

40.13 

40.40 

41.12 

30.34 

66 

45.32 

44.84 

37.23 

36.81 

37.52 

43.71 

43.99 

44.35 

33.38 

67 

49.00 

48.66 

42.13 

40.10 

40.96 

47.65 

47.70 

47.90 

36.72 

68 

52.99 

51.81 

44.67 

43.71 

44.78 

52.00 

51.54 

51.77 

40.37 

69 

57.35 

57.32 

47.31 

47.68 

48.98 

56.76 

55.76 

55.99 

44.35 

70 

62.07 

62.22 

50.06 

52.04 

53.65 

61.99 

60  85 

60.59 

48.67 

71 

67.23 

67.52 

53.38 

56.83 

58.81 

67.67 

67.22 

65  56 

53.34 

72 

72.81 

73.27 

53.04 

62.07 

64.49 

73.73 

75.12 

70.95 

58.36 

73 

78.92 

79.50 

57.82 

67.83 

70.81 

80.18 

84.07 

76.75 

63.76 

74 

85.48 

86.23 

63.14 

74.13 

77.78 

87.03 

93.55 

82.98 

69.55 

75 

92.64 

93.51 

66.33 

81.04 

85.48 

94.37 

102.55 

89.67 

75.72 

76 

100.43 

101.37 

72.15 

88.60 

93.99 

102.31 

110.28 

96.81 

82.30 

77 

108.82 

109.85 

87.34 

96.86 

103.40 

111.06 

115.98 

104.43 

89.29 

78 

117.95 

118.97 

100.16 

105.89 

113.84 

120.83 

120.26 

112.53 

96.70 

79 

127.82 

128.79 

114.31 

115.73 

125.35 

131.73 

123.62 

121.11 

104.54 

80 

138.44 

139.34 

136.31 

126.47 

138.09 

144.47 

127.68 

130.19 

112.82 

81 

150.00 

150.66 

158.20 

138.16 

152.20 

158.61 

133.48 

139.77 

121.55 

82 

162.40 

162.78 

172.21 

150.87 

167.77 

174.30 

142.65 

149.85 

130.73 

83 

175.73 

175.75 

187.25 

164.68 

184.96 

191.56 

155.47 

160.44 

140.38 

84 

190.14 

189.60 

202.98 

179.64 

204.04 

211.36 

172.11 

171.53 

150.50 

85 

205.69 

204.35 

212.21 

195.83 

225.08 

235.55 

191.00 

183.12 

161.12 

86 

222.13 

220.05 

219.76 

213.32 

248.35 

265.68 

211.55 

195.20 

172.24 

87 

240.01 

236.72 

231.99 

232.17 

274.15 

303.02 

232.48 

207.77 

183.87 

88 

258.87 

254.38 

246.61 

252.43 

302.57 

346.69 

253.40 

220.81 

196.04 

89 

278.81 

273.05 

262.89 

274.16 

334.18 

395.86 

273.76 

234.33 

208.76 

90 

300.75 

292.73 

283.02 

297.39 

368.79 

454.55 

294.17 

248.30 

222.04 

91 

322.58 

313.43 

312.58 

322.15 

407.67 

532.47 

314.72 

262.71 

235.90 

92 

347.88 

335.14 

352.94 

348.45 

449.75 

634.26 

335.96 

277.54 

250.37 

93 

371.20 

357.85 

406.93 

376.27 

498.45 

734.18 

357.74 

292.78 

265.46 

94 

400.00 

381.52 

484.19 

405.58 

549.38 

857.14 

380.02 

308.40 

281.18 

95 

424.73 

406.12 

608.49 

436.31 

602.74 

1000.00 

404.33 

324.37 

297.57 

96 

457.94 

431.60 

867  .  47 

468.37 

655.17 

431.47 

340.69 

314.63 

97 

482  .  76 

457.88 

1000.00 

501.61 

700.00 

462.18 

357.31 

332.38 

98 

500  !  00 

484^88 

535.87 

1000.00 

495.12 

374.21 

350.83 

99 

533.33 

512.51 

570  93 

531.29 

391.36 

369.99 

100 

571.43 

540.64 



606.53 

581.73 

408.74 

389.87 

101 

666  .  67 

642  38 

666.67 

426.30 

102 

1000.00 

1000.00 

1000.00 

444.02 

103 

461.86 

104 

479.79 

105 

497.78 

106 

515.78 

107 

533.76 

108 



551.69 

147 

APPLICATION  OF  ACTUARIAL  PRINCIPLES. 

Within  the  last  ten  years  the  fraternal  beneficiary  societies  generally  have  followed 
actuarial  advice  in  making  readjustments,  where  the  management  could  control  the 
situation.  Many  times  expert  assistance  was  received  by  the  executives  and  rejected 
by  the  representatives  of  the  members.  Sometimes  officials  have  gotten  "cold  feet,"  in 
view  of  possible  defeat  for  reelection  and  forgot  the  actuary  and  his  advice. 

But  the  general  situation  is  very  encouraging,  and  it  is  a  personal  satisfaction  to 
testify  to  the  earnest  solicitude  of  fraternal  officials  for  solvency  and  permanency  of 
their  societies. 

To  this  end  the  employment  of  actuaries  is  the  rule,  rather  than  the  exception,  and 
it  is  pleasant  to  note  that  where  there  was  one  available  ten  years  ago,  now  there 
are  a  score  or  more  offering  their  services  as  experts. 

If  the  rate  of  mortality  were  uniform  at  all  periods  of  life,  fraternal  society  finances 
would  be  a  very  simple  matter,  and  the  original  equal  levy  plan  would  suffice  for  the 
perpetuation  of  the  organizations. 

However,  the  rate  of  mortality  increases  with  the  age  of  the  individual,  and  there- 
fore, to  have  a  level  contribution  rate,  with  a  uniform  number  of  assessments  each 
year,  it  is  necessary  to  charge  more  than  sufficient  to  meet  the  current  death  claims  in 
the  early  years  and  accumulate  the  excess  of  contributions  against  the  period  when  the 
annual  claims  will,  by  reason  of  increasing  age,  exceed  the  annual  contribution. 

Tq  fix  the  contribution  at  a  rate  which  will  be  adequate  to  provide  for  future 
claims  matured  from  year  to  year  to  the  end  of  the  longest  life,  without  making  the 
rate  prohibitive,  it  is  necessary  to  take  advantage  of  interest  increment. 

In  Exhibit  i,  demonstrating  the  method  of  computing  level  contribution  rates,  it 
was  shown  that  $92,215,000  of  claims,  maturing  year  to  year  from  entry  age  35  to  the 
limiting  age  of  99,  could  be  provided  for  with  a  present  sum  at  age  35  of  $27,818,663.44 
improved  at  4  per  cent  interest  compounded  annually.  In  other  words,  the  single  con- 
tribution as  a  principal  sum  would  provide  for  $27,818,663.44  and  the  interest  would 
provide  for  $64,396,336.56  of  the  total  of  $92,215,000  in  claims — more  than  two-thirds 
paid  from  interest  earning  on  the  principal,  after  paying  the  yearly  instalments  of 
claims. 

As  elsewhere  shown,  without  the  aid  of  interest,  it  would  require  an  average  annual 
contribution  of  $29.11,  while  with  the  4  per  cent  interest  increment,  the  annual  level 
contribution  is  $16.62  at  age  of  entry,  35. 

The  effect  of  interest  is  not  so  marked  in  connection  with  the  annual  as  with 
the  single  premium,  because  of  the  larger  principal  to  be  improved  in  the  latter  case. 

The  fact  to  be  impressed  is  that,  without  the  interest  factor  level  contribution  rates 
would  be  unnecessarily  heavy.  To  introduce  this  factor  involves  a  second  complica- 
tion to  that  of  dealing  with  the  increasing  cost  of  insurance  by  virtue  of  increasing 
age. 

It  is  a  common  sense  observation  to  assert  that  it  requires  some  one  especially 
qualified  to  compute  and  apply  adequate  and  satisfactory  rates  of  contribution. 

I  have  repeatedly  remarked  that  before  there  can  be  any  application  of  actuarial 
principles,  and  before  computations  can  be  commenced,  there  must  be  an  estimate 
of  the  amount  of  yearly  instalments  of  claims  that  will  in  the  future  be  made  by  the 
members  upon  the  funds. 

The  only  basis  for  such  an  estimate  is  past  experience,  either  of  the  society  in 
question  or  of  other  societies  similarly  situated,  or  similarly  constituted  to  the  partic- 
ular society  for  which  a  scale  of  rates  is  desired. 


148 


This  diagram  is  presented  for 
the  lesson  that  may  be  learned 
from  it. 

It  suited  the  purpose  for 
which  this  table  was  con- 
structed to  reproduce  the  actual 
experience,  however  erratic,  and 
no  criticism  is  intended  when  I 
say  that  it  would  be  unsuited  as 
a  basis  for  the  estimate  of 
future  claims,  or  for  the  com- 
putation of  level  contribution 
rates  to  provide  for  future 
claims. 

This  would  be  a  case  where 
the  experience  of  the  particular 
society  would  not  yield  data  for 
a  satisfactory  Mortality  Table, 
in  its  entirety,  and  when  it 
would  be  advisable  .to  employ 
some  standard  table  (such  as 
the  National  Fraternal  Con- 
gress Table  in  this  case),  with  an 
assumed  mortality  approximat- 
ing actual  experience  at  the  ages 
where  there  were  insufficient  ex- 
posures to  give  reliable  results. 


GRADUATION 

This  diagram  is  given 
as  a  second  illustration  of 
the  Mortality  Curve  re- 
sulting from  the  gradu- 
ation of  irregular  death 
ratios.  The  original  data 
was  taken  from  the  ex- 
perience of  a  society  which 
had  comparatively  few 
exposures  and  deaths 
above  the  age  of  65. 
The  dotted  line  rep- 
resents the  Mortality 
Curve  projected  upon 
other  experience.  A 
twenty-one  term  sum- 
mation formula  was  em- 
ployed for  the  graduation. 


IB  10  *li*  i«  M  30  M.  *»  35  3«  40  4i  44  4«  46  SO   5Z  54  56  58  60  6Z  ^4  W  68    70  72  74   76  78  0O  fll  84  3d  fl*  SO 


150 

THE  MORTALITY  TABLE. 

The  construction  of  a  mortality  table  from  original  data  should  always  be  en- 
trusted to  a  competent  actuary. 

It  is  not  the  present  purpose  to  go  into  detail  concerning  the  preparation  of  the 
data  and  their  subsequent  treatment. 

In  1906  I  made  a  report  to  the  Committee  on  Statistics  and  Good  of  the  Orders 
of  the  National  Fraternal  Congress,  and  I  have  reproduced  the  Committee's  report 
to  the  Congress,  which  contains  eight  separate  mortality  tables,  four  of  them  unad- 
justed and  four  graded.  The  tests  of  the  graduations  are  also  given. 

It  would  fill  a  book  to  enter  into  an  explanation  of  the  proper  method  of  transcrib- 
ing the  data  from  the  records,  and  of  their  treatment  before  the  unadjusted  tables 
can  be  secured,  and  the  graduation  so  as  to  correctly  reflect  the  actual  mortality  ex- 
perience. 

I  content  myself  with  a  reference  to  the  report  to  the  National  Fraternal  Congress 
in  1906,  and  with  a  diagram  showing  the  mortality  curves  of  the  American  Experience 
and  National  Fraternal  Congress  Mortality  Tables,  together  with  a  graphic  representa- 
tion of  the  unadjusted  and  adjusted  Mortality  Tables,  according  to  the  experience  of 
the  Pacific  Jurisdiction  of  the  Woodmen  of  the  World. 

I  had  nothing  to  do  with  the  graduation  of  the  unadjusted  ratios,  and  present  the 
diagram  because  of  the  unusual  character  of  the  mortality  curve.  Ordinarily  a  reliable 
experience  would  produce  a  curve  similar  to  that  of  the  American  Experience  Table 
or  the  National  Fraternal  Congress  Table. 

The  purpose  of  a  graduation  is  to  smooth  out  the  irregularities  of  the  original 
ratios,  and  to  do  this  the  line  representing  the  graduation  should  cut  the  irregular 
line,  representing  the  unadjusted  ratios,  so  that  equal  parts  should  be  presented  above 
and  below  the  graphically  illustrated  mortality  curve.  The  graduation  of  the  W.  O. 
W.  Pacific  Jurisdiction  experience  appears  to  follow  this  rule,  and  yet  the  falling 
away  from  the  Congress  Table  after1  age  64  would  indicate  a  paucity  of  exposures 
and  an  unreliable  experience  at  the  advanced  ages.  The  violent  fluctuations  from  very 
high  to  very  low  death  rates  at  ages  66  to  70  bear  out  the  assumption  of  unreliability 
of  the  experience  at  the  advanced  ages. 

EXPLANATION   OF  COMMUTATION   COLUMNS. 

The  following  comprehensive  explanation  was  prepared  by  Dr.  George  E.  West,  for 
the  1902  edition  of  "Life  Insurance  Premiums — How  Computed,  Tested,  and  Valued." 
I  reproduce  it  in  memory  of  a  dear  friend,  and  for  the  reason  that  it  is  unequalled  as  a 
brief  and  lucid  exposition  of  a  technical  subject.  Later  on  I  attempt  to  give  a  more 
extended,  if  not  a  plainer,  discussion  of  commutation  columns  and  the  arithmetical  pro- 
cess of  computing  contribution  rates: 

The  methods  of  obtaining  the  data  from  which  a  mortality  table  is  constructed 
are  so  well  understood  that  a  description  thereof  would  probably  be  superfluous. 
The  actual  graduation  of  a  table  is  too  technical  a  process  for  popular  exposition. 
It  may  be  best,  therefore,  to  take  the  table  for  granted,  and  to  confine  our  attention 
to  a  description  of  its  main  features,  and  an  explanation  of  a  few  of  its  principal  uses. 
It  is  advisable  to  premise  that  a  mortality  table  does  not  represent  any  society — past, 
present,  or  future — for  which  reason  averages  of  the  ratios  at  various  ages  are  of  no 
practical  utility.  What  it  does  represent  is  the  average  mortality  experience  of  a 
certain  number  of  individuals  taken  at  the  initial  age  and  kept  under  observation 
during  their  respective  lives.  Any  age  subsequent  to  the  first  may  be  made  the 
initial  age  by  cutting  out  the  preceding  portion  of  the  table. 

The  first  column  of  the  table  contains  in  serial  order  the  years  of  age  from  the 
earliest  selected  to  the  assumed  limit  of  human  life.  The  second  column,  designated 


151 

by  the  letter  "1,"  the  initial  of  the  word  "living,"  contains  the  survivors  at  each 
attained  age  of  the  original  entrants,  the  number  of  which  latter,  known  as  the  radix 
of  the  table,  being  placed  opposite  the  initial  age.  The  survivors,  at  any  particular 
age,  are  indicated  by  the  column  symbol  with  the  appropriate  suffix;  thus,  120,  Iso, 
ho,  express  the  numbers  surviving  at  ages  20,  30,  and  40,  respectively.  When  a 
general  symbol  is  desired,  it  is  customary  to  employ  lx,  in  which  x  may  have  every 
value  successively  in  the  age  column. 

Next  to  the  "1"  is  usually  placed  the  "d"  column,  "d"  being  the  initial  letter  of 
the  word  "dying."  As  before,  suffixes  are  employed  to  secure  definiteness;  thus, 
d20  indicates  the  tabular  number  dying  between  ages  20  and  21.  The  general  symbol 
is  dx.  It  is  obvious  that  — 

I2o-d20=l2i,  whence  d2o=l2o—  Ui.     Generally,  dx=lx-lx+1. 

The  initial  letter  of  the  word  "probability,"  "p,"  heads  the  column  showing  the 
probability  of  living  at  least  one  year  at  each  age.  The  probability  of  surviving  from 
age  20  to  age  21  is  expressed  by  p2o;  the  general  symbol  is  px.  As  of  lx  persons  who 
attain  age  x,  lx+i  will  survive  to  age  x  +  1,  it  is  evident  that  — 


The  probability  of  dying  within  a  year  at  any  age  is  indicated  by  the  letter  "q," 
the  initial  of  the  word  "quotient,"  suffixes  being  employed  for  the  usual  purpose. 
Of  lx  persons  living  at  age  x,  dx  die  within  a  year;  therefore  — 


This  relation  may  be  otherwise  obtained.      Certainty   is   designated    by    1,   and   it   is 
certain  that  a  person  will  either  survive  or  perish  during  the  year;    hence  — 

Px+qx  =  l,  or  qx  =  l—  px,  as  before. 

The  respective  probabilities  of  surviving  and  dying  during  the  second  year  are  de- 
noted by  the  symbols  2px  and  2qx,  and,  generally,  during  the  nth  year,  by  npx  and  nq». 
It  is  evident  that  — 

2px=px  Px+l, 

that  apx  =2px  px+2  =PX  Px+i  p*+2, 

and,  generally,  that  npx  =  px  Px+i  ..........  Px+n-i- 

Similarly,  2qx  =  px  qx+i,  sqx  =  2px  qx+2  =  px  Px+i  qx+2, 

and,  generally,  nqx=px  Px+i  ----  Px+n-2  qx+n-i. 

Therefore,  npx+nqx  =  (px+n-l-f  qx+n-1  =l)(px  Px+l  .....  Px+n-2)  =n-lpx. 

The  present  value  of  a  dollar,  due  one  year  hence,  is  denoted  by  the  letter  "v," 
the  initial  of  the  word  "value;"  v2  represents  the  value  of  a  dollar  due  two  years 
hence,  and,  generally,  v*  symbolizes  the  value  of  a  dollar  due  x  years  hence. 

In  insurance  calculations  it  is  commonly  assumed  that  premiums  are  payable 
annually  in  advance,  and  claims  at  the  end  of  the  year.  Starting  at  age  x,  each 
member  exposes  the  society  during  the  first  year  to  a  risk  of  qx.  As  claims  are  not 

payable  till  the  end  of  the  year,  the  value  of  the  risk  at  the  beginning  is  vqx=^T^: 

lx 

During  the  second  year  the  risk  is  2qx,  and  its  value  is  — 


i  x     ,  . 

lx  lx+1  1X 

Similarly,  the  risk  during  the  nth  year  is  nqx,  and  its  value  is  — 


The  value  of  the  combined  risk  for  any  number  of  years  is,  therefore  — 
vqI+v>  2qI+v°  3q*  +  .....  +v»  .q.  =  V<i'+V'  d' 


152 

If  in  this  formula  n  is  given  such  a  value  that  x+n  — 1  becomes  the  last  age  in  the 
mortality  table,  the  complete  expression  gives  the  value  of  an  insurance  of  one  dollar 
for  the  whole  of  life,  the  symbol  for  which  is  Ax.  For  convenience  only,  it  is  customary 
to  multiply  both  numerator  and  denominator  of  the  fraction  by  vx,  so  that  we  have — 

From  inspection,  it  is  evident  that  every  term  in  the  numerator  of  the  second  mem- 
ber of  this  equation  is  of  the  same  form — that  is,  by  giving  x  successive  values  from 
x  to  x+n  — 1,  we  get  the  successive  terms.  If  then,  we  write  vx+  l  dx=Cx,  vx+2  dx+1 
will  equal  Cx+i,  etc.,  whence — 


A 


Cx+Cx+i+Cx+2  +  '  '         '   +  Cx+n-l 


If,  now,  we  sum  Cx,  beginning  at  the  highest  age,  and  write  the  result,  Mx,  the  equa- 
tion becomes   Ax  =      *  .     Ax  is  the  net  single  premium  for  a  whole  life  assurance  of 

one  dollar,  issued  at  age  x. 

As  annual  premiums  are  payable  in  advance,  the  first  is  certain  and  immediate, 
and  hence  has  the  full  value,  viz.,  Px.  The  probability  that  the  second  will  be  paid 
is  px,  and  the  time  of  payment  is  one  year  hence;  therefore,  the  value  of  the  premium 
is  — 


The  value  of  the  third  premium  is — 

Px  v2  2px  =  PxV2^1 

Similarly,  the  value  of  the  nth  premium  is — 


The  value  of  the  entire  series  of  premiums  is,  obviously  — 


p 


Multiplying    both    numerator   and    denominator    by    vx    the    expression    becomes  — 

P  VXlx+VX+1lx+1+V*+nx+2  +  --          '  •   +V*+n"1    lx+n-1 

vMx 

If  n  be  given  such  a  value  as  to  make  x+n—  1  the  last  age  in  the  mortality  table,  the 
formula  expresses  the  combined  value  of  the  premiums  payable  during  life.  From 
an  inspection  of  the  numerator  of  the  fraction,  it  is  evident  that  the  successive  terms 
are  alike  as  to  form,  so  that  each  can  be  formed  from  the  preceding  one  by  an  increase 
of  one  in  the  value  of  x.  If  then,  we  write  vx  lx  =  Dx,  the  formula  becomes  — 


p      x        x+         x+  +Dx+n-i 

•tx  -  -  7^  - 

Dx 


Summing  Dx,  beginning  at  the  highest  age,  and  writing  the  result  as  Nx,  the  com- 
bined value  of  the  premiums  may  be  expressed  as  — 

N* 


This  must  be  equal  to  the  value  of  the  assurance  which  has  already  been  found  to  be 

^N.    Mx 


Mx         Mx      ...  .  . 

r-  or  -p— .     Writing — 
Vx  Ix  L>x 


N 

calculation  of  a*.  In  other  words,  Nx  is  the  summation  of  Dx+i,  so  that  a*=r—?,  whereas 

Lf  x 


it  follows  that — 

As  Px  is  payable  yearly  during  life,  it  is  similar  to  a  life  annuity,    of  which  the  first 

Nx 
payment  is  due.      Therefore,  the  value  of  a  life  annuity  due  of  Px  is  PX-J^-,   whence 

Nx 

the  value  of  a  like  annuity  of  one  dollar  is  equal  to  ^—.     This  value  is  denoted  by  ax. 

Immediately  after  the  first  payment  of  an  annuity  due,  it  becomes  an  ordinary  or 
immediate  annuity,  of  which  the  first  payment  will  be  due  a  year  hence.  Expressing 
this  value  by  ax,  it  follows  that — 

ax=ax-l. 

It  is  customary  in  England  to  arrange  the  commutation  columns  so  as  to  facilitate  the 
calculation  of  a*.  In  other  words,  Nx  i; 

by  the  American  form  of  table,  ax  =  x^+1- 

i-^x 

The  calculation  of  varying  annuities,  assurances,  and  premiums  is  much  facilitated 
by  summations  of  the  M  and  N  columns,  producing  the  R  and  S  columns,  respectively. 
Of  the  six  columns  heretofore  described,  the  usefulness  is  by  no  means  equal. 
Although  C  is  the  basis  of  M,  it  is  almost  never  directly  involved  in  computations, 
and  is,  consequently,  seldom  tabulated.  On  the  other  hand,  the  use  of  S  is  limited 
to  a  class  of  obligations  with  which  fraternal  orders  are  not  concerned.  Orders  which 
scale  certificates  for  a  number  of  years  are  about  the  only  ones  requiring  the  R  column. 
There  remain,  then,  three  columns,  D,  N,  and  M,  which  may  be  regarded  as  indis- 
pensable. 

As  already  shown — 

dx=lx-lx+i, 

whence —  v**  l  dx=vx+1  (lx— lx+i)  =  v.  vxlx— vx+1  lx+i, 

or—  Cx=vDx  —  Dx+i. 

Similarly —  Cx+i  =vDx+1  —  Dx+2,  etc. 

Hence,  by  summation — 

Mx=vNx  — Nx+i. 

Summing  once  more,  it  is  obvious  that — 

Rx=vSx-Sx+i. 
These  formulas  are  useful  for  verification  purposes. 


THE  INSURANCE  CONTRACT. 

All  of  the  preceding  matter  is  of  a  general  character.  At  length  I  have  told  about 
the  history  of  different  kinds  of  Insurance  Organizations,  and  of  the  legislation  enacted 
for  their  regulation,  and  of  what  men  in  their  management  have  said  about  them  and 
their  objects,  and  of  the  immense  sums  represented  by  their  promises  to  pay  benefits 
upon  the  occurrence  of  stated  events. 

However,  in  the  last  analysis  the  question  of  insurance  is  narrowed  to  the  con- 
tract between  the  corporation  and  the  individual. 

The  billions  of  dollars  involved  in  the  promises  to  pay  benefits  are  made  up  of 
millions  of  individual  undertakings,  and  to  have  a  comprehensive  idea  of  the  whole 
we  must  be  informed  concerning  the  individual  agreement. 


154 

The  Insurance  Contracts  of  Companies,  of  Associations,  and  of  Societies,  with 
very  few  exceptions,  have  developed  into  an  affair  of  business,  whereby  the  party  of 
the  first  part,  known  as  the  insurer,  promises  to  pay  certain  sums  upon  the  hap- 
pening of  a  designated  event,  such  as  death  or  disability,  or  upon  the  termination  of  a 
stated  period  or  on  the  attaining  of  a  given  age  or  prior  to  termination  by  expiry. 
The  party  of  the  second  part,  known  as  the  insured,  in  consideration  of  the  promised 
benefit,  agrees  to  make  periodical  contributions  during  the  term  of  insurance,  or  for 
a  limited  period,  or  until  the  maturty  of  the  contract  by  death,  disability,  or  otherwise, 
or  until  its  expiration. 

In  the  contract  of  the  life  company  the  amount  of  the  benefit  and  the  amount  of 
the  contribution  are  definitely  stated. 

In  the  latest  form  of  contract  of  the  Fraternal  Beneficiary  Society  the  amount  of 
the  benefit  is  definitely  stated,  but  in  the  great  majority  of  certificates  now  outstanding 
the  maximum  amount  only  is  definitely  fixed.  In  all  cases  the  contribution  is  subject 
to  change. 

The  relations  between  the  parties  to  the  contracts,  or  policies,  issued  by  the  life 
companies,  have  been  established  by  law  and  by  judicial  decisions.  The  company 
must  pay  the  amount  promised  when  it  matures  under  the  provisions  of  the  contract, 
and  it  must  account  to  the  policy-holder  for  unused  contributions  (with  increment) 
should  he  decide  to  withdraw  from  the  agreement  before  maturity  of  the  promise. 

The  relations  between  the  parties  to  the  Fraternal  Beneficiary  Society  contract  are 
unsettled.  Generally  the  statement  is  correct  that  the  society  must  pay  the  amount 
promised  when  it  matures.  In  many  instances  the  amount  to  be  paid  is  limited  to 
the  proceeds  of  one  assessment.  In  only  a  few  cases  must  the  society  account  to  the 
withdrawing  member  for  any  excess  of  contributions  over  cost  of  protection. 

The  contract  of  the  life  insurance  company  is  scientifically  constructed  so  that 
upon  execution,  the  promise  by  the  first  party  to  pay  benefit  has  a  present  worth 
equal  to  the  promise  by  the  second  party  to  make  periodical  contributions. 

The  same  equitable  conditions  now  obtain  in  the  contracts  of  many  Fraternal 
Beneficiary  Societies;  but  under  the  majority  of  outstanding  certificates  the  original 
promise  was  made  and  the  contract  entered  into  without  any  appreciation  of  the 
necessity  and  without  any  idea  of  the  equity  of  requiring  contributions  with  a 
present  value  equivalent  to  that  of  the  benefit  promised. 

This  condition  is  due  to  the  fact  that  the  Fraternal  Society  contract  was  not  con- 
sidered as  an  affair  of  business. 

The  conception  of  the  transaction  was  that  the  members  would  always  make  vol- 
untary contributions  to  pay  death  benefits,  and  that  the  certificates  held  by  themselves 
were  not  "Insurance  Contracts,"  but  merely  evidences  of  membership  and  fraternal 
cooperation. 

The  same  persons,  who  carried  polices  in  a  life  company  and  held  certificates  in  a 
fraternal  beneficiary  society,  would  accept  the  former  on  a  business  basis  of  making 
adequate  contributions  in  consideration  of  the  benefits  promised  by  the  life  company, 
and  ignore  entirely  a  similar  obligation  to  the  fraternal  society,  notwithstanding  the 
expectation  of  equal  money  returns  in  the  way  of  insurance  benefits. 

From  what  has  hereinbefore  been  given  concerning  the  history  of  Fraternal  Bene- 
ficiary Societies,  it  is  not  strange  that  the  first  development  of  the  certificate  of  mem- 
bership into  a  business  contract  was  on  the  benefit  side. 

The  members  very  naturally  preferred  to  maintain  the  voluntary  principle  as 
applied  to  contributions  because  it  directly  affected  themselves,  and  they  desired  to 
maintain  volition  unrestrained  by  mathematical  formula  or  business  demands. 


1  55 

Since  the  benefits  were  intended  for  the  relief  or  the  support  of  themselves  or 
their  dependants,  and  since  they  realized  the  necessity  for  certainty  in  such  relief  or 
support,  very  naturally  they  hesitated  not  at  all  in  asserting  a  vested  right  in  and  to 
the  promised  benefits. 

This  development  changed  the  view  of  members  to  look  upon  their  certificates  as 
Contracts  and  to  depend  upon  their  enforcement  for  relief  to  their  dependants  or  to 
themselves. 

The  members  of  the  Societies  have  not  failed  to  make  demands  for  benefits,  but 
they  have  neither  taken  the  trouble  nor  the  time  to  carefully  consider  the  relation  of 
these  demands  to  the  contributions  required  from  them  to  make  possible  the  pay- 
ment of  the  benefits. 

After  many  years  of  study  and  practical  experience  in  connection  with  the  affairs 
of  Fraternal  Beneficiary  Societies,  it  is  my  conclusion  that  indifference  of  members 
to  the  importance  of  perpetuating  these  great  provident  institutions  is  the  reason  for 
their  tendency  toward  paying  as  little  and  getting  as  much  as  possible  in  their  dealing 
with  the  Societies. 

They  strenuously  oppose  the  proposition  that  the  requirement  for  stated  and 
adequate  contributions  is  a  contractual  business  obligation. 

Nevertheless,  valuation  laws  and  business  necessities  are  impressing  and  bringing 
home  the  fact  that  the  contribution  side  to  the  Fraternal  Beneficiary  Society  contract 
is  a  business  affair,  and  the  party  of  the  second  part,  the  insured,  must  be  held  ac- 
countable as  having  assumed  a  business  obligation. 

EQUIVALENT  PROMISES. 

The  question  is,  What  constitutes  a  safe  and  equitable  insurance  contract? 

Its  equity  consists  in  starting  the  insurer  and  insured  on  even  terms,  without  dis- 
crimination against  or  favor  to  members,  when  the  value  of  the  promised  benefit  is  no 
more  nor  less  than  the'  value  of  the  promised  contributions. 

Its  safety  consists  in  collecting  an  income  and  conserving  an  accumulation  sufficient 
to  provide  for  the  payment  of  promised  benefits  as  they  mature  into  claims. 

The  Fraternal  Beneficiary  Society,  the  mutual,  cooperative  association  of  indi- 
viduals, has  no  capital  stock,  and  therefore  its  income  and  accumulation  must  be 
derived  from  the  contributions  of  its  members — treating  the  interest  earned  on  accu- 
mulation as  an  incident  of  excess  contributions. 

When  a  person  joins  such  an  association,  the  consideration  of  its  promise  to  pay  a 
benefit  is  the  promise  of  the  individual  to  make  contributions. 

It  is  obvious  that  the  value  of  the  promised  contributions,  at  the  inception  of  the 
contract,  must  be  equal  to  the  value  of  the  promised  benefits,  otherwise  the  associa- 
tion could  never  have  sufficient  income  to  discharge  its  assumed  liabilities — having  no 
primary  resources  other  than  the  contributions  from  its  members. 

If  the  association  is  to  be  a  successful  insurance  organization,  it  must  enter  into 
contract  with  each  member,  from  first  to  last,  upon  a  condition  of  equivalence  in 
values  of  benefits  and  contributions.  The  failure  to  exact  this  conditon  has  caused 
all  the  trouble  in  regard  to  the  fulfillment  of  promises,  and  has  brought  about  the 
necessity  for  readjustments. 

The  reason  for  the  failure  to  demand  contributions  equal  in  value  to  that  of  the 
benefits  promised  was  the  inability  of  the  organizers  of  Fraternal  Beneficiary  Societies 
to  determine  the  proper  rates  of  contribution. 

It  was  easy  enough  to  state  the  amount  of  benefit  to  be  granted. 


156 

To  know  the  contribution  that  would  certainly  provide  for  the  promised  benefit 
required  information  not  possessed  by  the  organizers,  and  hence  they  adopted  the 
method  of  fixing  an  arbitrary  rate  of  assessment. 

ASSESSMENTS-AS-NEEDEP. 

This  device  of  levying  assessments-as-needed  avoided  the  necessity  of  establishing, 
in  advance,  any  equivalent  relation  between  benefits  and  contributions.  The  latter 
were  left  to  be  determined  by  the  claims  for  benefits. 

Well-known  and  repeated  experiences  have  thoroughly  established  the  fallacy  of 
the  assessment-as-needed  plan  of  contribution.  It  requires  from  ten  to  thirty  years 
to  demonstrate  its  fallacy  by  actual  experience,  and  for  that  reason  it  has  been  a 
deceptive  plan  which  has  led  many  organizations  to  ruin. 

Members  satisfy  themselves  with  the  plausible  argument  that  the  plan  has  sufficed 
to  provide  for  claims  during  one  period  of  twenty  years.  They  ignore  the  fact  that 
age  distribution  and  death  rates  are  very  different  in  the  second  from  the  first  period, 
and  other  conditions  are  so  different  that  the  plan  which  will  serve  in  the  first  will  not 
answer  in  the  second. 

But  it  is  not  here  necessary  to  discuss  discredited  plans.  Xo  valuation  is  applicable 
to  the  assessment-as-needed  plan  of  contribution.  The  fact  that  the  representatives  of 
American  Fraternal  Societies  have  joined  in  an  endorsement  of  the  proposed  Uniform 
Bill,  which  demands  general  valuation,  placed  the  official  stamp  of  disapproval  and 
discredit  upon  that  plan.  The  officials  of  societies  still  employing  it  are  emphatic  and 
vigorous  in  condemning  it  as  a  fallacy  and  a  worn-out  expedient. 

The  assessment-as-needed  plan  must  not  be  confused  with  that  of  "uniform  con- 
tributions for  all  ages  of  entry"  as  practiced  by  English  Friendly  Societies. 

METHOD  OF  COMPUTING  RATES. 

It  is  not  in  criticism  of  societies  that  reference  is  made  to  their  crude  method  of 
levying  contributions.  They  were  intent  upon  doing  good  for  their  fellowmen,  and 
their  object  was  to  give  them  the  benefit  of  insurance  protection  at  actual  cost,  without 
any  element  of  profit.  To  accomplish  this,  they  believed  it  necessary  to  steer  as  far 
as  possible  from  business  methods.  Whatever  the  defects  in  their  plan  of  contribu- 
tions, they  established  organizations  which  have  paid  to  widows  and  orphans  hundreds 
of  millions  of  dollars. 

The  purpose  of  those  now  concerned  about  the  future  solvency  of  these  societies 
is  to  correct  past  errors  and  thus  assure  the  payment  of  the  8,000  millions  of  dollars 
in  outstanding  promises  to  pay  benefits,  and  to  enable  them  to  continue  indefinitely  the 
undertaking  of  billons  of  promises  with  certainty  of  performance. 

Getting  down  to  the  undisputed  facts  in  the  case,  if  8,000  millions  of  dollars  of 
present  promised  benefits  are  to  be  paid,  then  8,coo  millions  -  of  dollars  must  be 
raised  and  made  ready  for  the  benefit  claims  as  they  are  presented  for  payment. 
Likewise  the  billions  of  future  protection  must  be  provided  for  by  billions  in  con- 
tributions and  interest  earnings. 

In  other  words,  the  members  themselves  must  provide  for  their  beneficiaries,  and 
the  life  insurance  device  is  not  to  relieve  them  from  that  responsibility,  but  merely 
to  distribute  and  equalize  the  total  burden  through  cooperative  effort. 


157 

LAW  OF  MORTALITY. 

Life  insurance  is  not  a  gambling  scheme,  but  a  tried  and  tested  business  arrange- 
ment based  upon  contingencies  which  can  be  reduced  by  scientific  treatment  to  mathe- 
matical accuracy. 

These  contingencies  are  the  probabilities  of  living  and  dying. 

The  living  make  the  contributions.     The  dying  mature  the  claims. 

The  contributions  provide  for  the  claims. 

Obviously,  the  aggregate  contributions  (and  increment)  must  equal  the  aggregate 
claims. 

The  original  promoters  of  Fraternal  Beneficiary  Societies  understood  these  last 
four  propositions,  when  they  adopted  the  device  of  levying  assessments  as  needed. 
Unfortunately  they  neglected  to  reckon  with  the  inexorable  Law  of  Mortality,  and 
this  neglect  condemned  their  plan  to  failure. 

All  of  us,  even  children,  understand  the  effect  of  the  Law  of  Mortality,  though 
few  know  anything  about  its  application  to  the  life  insurance  business. 

For  example,  any  one  would  answer  that  more  persons  at  age  60  than  at  age  30 
would  die  within  one  year  out  of  1,000  persons  at  each  age. 

Any  one  would  answer  that  there  is  a  limit  to  life — that  men  cannot  live  always. 

These  are  the  effects  of  the  Law  of  Mortality,  namely : 

1.  More  members,  amongst  a  given  number,  die  at  advanced  than  at  younger  ages. 

2.  There  is  a  limit  to  human  life. 

Life  insurance  is  the  business  of  accepting  risks  on  human  life,  with  the  promise 
to  pay  benefits  in  the  event  of  death. 

To  properly  conduct  the  business  of  life  insurance  requires  a  knowledge  of  the 
duration  of  human  life  and  of  the  probable  number  of  deaths  to  be  expected  every 
month  or  every  year. 

The  necessity  for  this  knowledge  is  to  enable  the  insurance  manager  to  levy 
contributions  sufficient  to  provide  for  the  claims  expected  to  mature  by  death. 

The  practical  way  to  gain  this  knowledge  is  to  make  investigation  of  some 
mortality  experience. 

DEATH  RATE. 

Numerous  investigations  have  been  made,  and  it  has  been  found  that,  on  the 
average,  about  five  persons  die  within  one  year,  taking  1,000  at  age  20.  About  seven 
die  out  of  every  1,000  in  one  year  from  age  40  to  41.  At  50  about  eleven,  at  60 
about  twenty-three,  at  70  about  fifty-four,  at  80  about  one  hundred  and  thirty-eight, 
and  at  85  about  two  hundred  and  twenty-five  die  out  of  each  1,000  within  one  year. 
Ultimately  every  person  must  die. 

When  applied  to  life  insurance,  these  vital  statistics  mean  that  if  a  society  insured 
1,000  persons  at  age  20  it  could  expect,  within  one  year,  to  pay  five  death  claims.  If 
there  were  1,000  insured  at  age  40,  seven  death  c'aims  could  be  expected  within  one 
year.  At  age  50,  eleven  claims.  At  60,  twenty-three  claims.  At  70,  fifty-four  claims. 
At  80,  one  hundred  thirty-eight  claims.  At  85,  two  hundred  twenty-five  claims.  At  age 
99  (if  1,000  arrive  at  that  age),  one  thousand  claims  might  be  expected  within  the 
year.  So  few  would  survive  a  century  of  life  that  all  might  be  expected  to  d'ie 
before  attaining  100  years  of  age. 

With  a  knowledge  of  the  probable  deaths  to  occur  within  a  given  period  out  of  a 
given  number  exposed  to  death,  mortality  ratios  can  be  determined  by  dividing  the 
number  of  deaths  by  the  number  exposed  to  death. 


158 

If  1,000  are  exposed  and  five  die,  the  mortality  ratio,  or  death  rate,  is  .005.  If 
fifty-four  die  out  of  1,000,  the  death  rate  is  .054. 

These  ratios  ace  known  as  "death  rates,"  or  "probabilities  of  dying." 

The  probability  of  a  man  dying  within  one  year  at  age  20  is  expressed  by  the 
decimal  .005  and  at  age  70  by  .054  and  at  age  85  by  .225.  These  decimals  are  the 
quotients  of  the  number  expected  to  die  divided  by  the  number  exposed  to  death, 
according  to  the  National  Fraternal  Congress  Table  of  Mortality. 

If  an  investigation  be  made  of  the  mortality  experience  of  any  particular  society, 
the  actual  number  of  deaths  occurring  within  one  year  can  be  definitely  ascertained, 
and  by  simple  division  the  actual  death  rates  or  probabilities  of  dying  can  be  de- 
termined. 

For  example,  a  certain  Society,  for  one  year  had  an  average  membership  of 
2,939  at  age  20,  and  during  the  year  there  were  14  deaths.  Dividing  14  by  2,939  the 
mortality  ratio  of  .00476  is  obtained. 

That  is  to  say,  the  Society  experienced  for  the  year  at  age  20  a  death  rate  of 
4.76  per  1,000  members  exposed  to  death. 

The  probability  of  dying  of  one  of  the  2,939  members  was  .00476. 

At  age  70  it  had  410  members  exposed,  amongst  whom  25  died,  making  a  death 
rate  of  nearly  61  per  1,000.  The  probability  of  dying  of  one  of  the  410  members  was 
.060975- 

If  the  Society  mentioned  had  insured  each  of  the  2.939  members  at  age  20  for 
$1,000,  and  14  of  them  died  in  one  year,  obviously  the  Society  would  have  been 
called  upon  to  pay  $14,000.  To  be  able  to  discharge  its  liability  it  would  have  been 
necessary  to  have  collected  $4.76  from  each  of  the  2,939  members. 

If  the  Society  had  insured  each  of  the  410  members  at  age  70  for  $T,OOO,  and  25 
of  them  died  in  one  year,  there  would  have  been  25  death  claims  amounting  to 
$25,000,  requiring  $60.98  in  contributions  from  each  of  them  to  provide  for  these 
claims. 

In  the  case  of  the  2,939  members,  each  insured  for  $1,000  the  total  insurance  at 
risk  would  be  $2,939,000,  and  there  being  $14,000  of  claims,  the  latter  amount  would 
represent  one  year's  cost  to  the  Society  in  assuming  liability  for  $2,939,000  of  protec 
tion  on  members  at  age  20. 

In  the  case  of  the  410  members  at  age  70,  there  would  be  only  $410,000  insurance 
at  risk;  but  the  year's  cost  to  the  Society  would  be  $25,000. 

The  $14,000  and  $25,000  likewise  would  represent  the  value  of  the  benefits  prom- 
ised to  members  at  ages  20  and  70,  while  the  $14,000  and  $25,000  contributed  by  the 
members  would  represent  the  value  of  the  contributions. 

With  less  than  one-seventh  of  the  protection  the  amount  of  the  claims  incurred 
was  nearly  double  for  the  members  at  age  70,  compared  with  those  at  20. 

On  the  average,  it  costs  a  society  from  ten  to  tweVe  times  more  to  insure  members 
for  one  year  at  age  70  than  at  age  20. 

The  insurance  business  is  like  any  other  kind  of  business  ;  it  will  become  insolvent 
if  cost  is  not  obtained  for  what  is  sold. 

Unless  the  Society  received  at  least  $4.76  from  each  of  the  2,939  members  at  age 
20,  it  could  not  pay  $14,000  in  claims.  Similarly,  $60.98  was  the  necessary  contribution 
from  each  of  the  410  members  to  enable  the  Society  to  pay  $25,000  in  claims  incurred 
on  account  of  the  $410,000  of  protection  granted  to  them  for  one  year. 

DISTRIBUTION  OF  COSTS. 

In  other  words,  the  Society  must  obtain  contributions  from  its  members  sufficien 
to  provide  for  the  cost  of  protection  granted. 


159 

Of  course,  this  fact  is  now,  and  always  has  been,  known  to  managers  of  Fraternal 
Beneficiary  Societies. 

The  trouble  with  them  has  been  in  the  distribution  of  the  costs. 
For  example,  some  of  them  made  an  equal  levy  upon  all  members  regardless  of 
age.     They  would  throw  together  the  2,939  members  at  20  and  the  410  at  70,  making 
a  total  of  3-349  members. 

Likewise  they  would  make  one  sum  of  the  $14,000  and  the  $25,000  of  claims,  or  a 
total  of  $39,000,  and  then  levy  on  each  of  the  3,349  members  annual  assessments 
amounting  to  $11.65  per  $1,000. 

By  the  equal  levy  method  the  distribution  of  the  total  costs  of  $39,000  would 
compel  the  2,939  members  to  pay  $34,223.50  and  the  410  members  to  pay  $4,776.50; 
notwithstanding  the  fact  that  the  Society  had  incurred  claims  of  $14,000  on  account 
of  the  2,939  members  at  age  20  and  of  $25,000  on  account  of  the  410  at  age  70. 

The  Society  as  a  corporation  is  concerned  only  in  obtaining  contributions  sufficient 
to  provide  for  total  claims  incurred,  and  the  equal  levy  plan  is  all  right  for  that 
purpose,  so  long  as  it  can  be  worked  successfully. 

But  under  that  plan  the  young  and  the  old  are  combined  to  the  great  disadvantage 
of  the  former. 

Standing  by  themselves,  the  2,939  would  contribute  a  total  of  $14,000.  Combined 
with  only  410  members  at  age  70,  they  would  be  compeled  to  contribute  $34,223.50. 

In  the  course  of  operation  members  continually  advance  in  age,  and  if  there  were 
1,000  members  at  age  70,  and  only  1,200  at  age  20,  then,  at  the  above  ratios,  there 
would  be  6  deaths  amongst  the  1,200  and  61  amongst  the  1,000. 

The  1,000  members  at  70  would  impose  $61,000  of  claims,  and  the  1,200  at  20 
would  cause  $6,000  of  claims.  Combined,  there  would  be  a  total  of  $67,000  in  claims. 
If  the  1,000  and  the  1,200  members  were  to  pay  equally,  they  would  be  called  upon 
to  contribute  in  the  year  $30.46  each. 

The  young  men  at  20  might  willingly  submit  to  an  annual  contribution  of  $11.65 
(less  than  $1.00  per  month),  but  few  of  them  would  pay  $30.46  (more  than  $2.50  per 
month)  for  $1,000  of  protection. 

The  equal  levy  plan  and  the  assessnrent-as-needed  plan  of  co'itribution  are  alike 
defective  in  that  they  fail  to  distribute  equally  and  equitably  the  costs  of  protection. 
These  plans  discriminate  against  the  younger  members. 

In  the  course  of  practical  operation  there  are  many  members  at  advanced  ages, 
and  to  favor  them  by  exacting  excessive  contributions  from  the  members  at  the 
younger  ages,  imposes  so  much  of  a  burden  upon  the  latter  that  they  withdraw  from 
the  Society,  and  others  cannot  be  induced  to  take  their  places,  and  the  plan  becomes  a 
failure. 

This  has  been  the  final  result  where  the  equal  levy  or  assessment-as-needed  plan 
has  been  continued  long  enough. 

From  this  general  statement  may  be  excepted  American  and  British  Societies  where 
benefits  are  small  and  the  fraternal,  social,  or  cooperative  features  are  strong.  Also 
those  Societies  with  small  benefits  and  where  the  maximum  age  of  admission  is 
low  and  uniform  contributions  are  maintained  by  accumulation  from  excess  con- 
tributions. 

CONTRIBUTION  AND  COST. 

For  permanent  success,  the  contributions  exacted  must  be  proportionate  to  the 
cost  of  the  protection  granted. 

Where  the   yearly   cost  to  the    Society   on   $2,939,000  of   insurance   is   $14,000,   the 


160 

proper  contribution  for  the  one  year  for  each  member  per  $1,000  of  protection  would 
be  $4.76. 

Where  the  yearly  cost  on  $410,000  of  insurance  is  $25,000,  the  proper  and  equitable 
contribution  is  $60.98  per  $1,000  for  the  one  year  of  protection. 

The  contribution  by  the  member  is  simply  the  purchase  price,  and  the  latter  is 
always  determined  by  the  cost  of  production,  of  manufacture,  or  of  protection,  as  the 
case  may  be — in  life  insurance  it  is  the  cost  of  protection. 

To  demand  a  contribution  per  $1,000  from  a  member  at  age  70,  which  is  ten  or 
twelve  times  the  contribution  demanded  of  a  member  at  age  20,  is  not  a  discrimination 
against  the  aged  member,  but  is  merely  conforming  to  the  requirements  of  life  in- 
surance cost  as  demonstrated  in  actual  business  conduct. 

AGE  AND  COST. 

The  paramount  factor  in  the  determination  of  life  insurance  cost  is  that  of  age. 

It  has  been  shown  that  the  death-rate  increases  with  the  advance  in  age. 

An  increased  death-rate  of  course  means  a  larger  number  of  deaths  out  of  a  given 
number  exposed  to  death. 

The  larger  number  of  deaths  means  a  greater  amount  of  claims. 

A  greater  amount  of  claims  means  a  higher  cost  of  life  insurance  protection. 

For  the  present  argument  (omitting  any  consideration  of  the  effect  of  accumulation), 
the  method  of  ascertaining  cost  is  similar  to  that  for  obtaining  death-rate,  or  probability 
of  dying,  namely, 

Divide  the  amount  of  claims  by  the  insurance  protection  at  risk. 

From  the  experience  of  any  Society  the  amount  of  insurance  exposed  to  risk  can 
be  obtained,  and  also  the  amount  of  claims  can  be  ascertained,  in  a  like  manner  to 
that  explained  for  determination  of  members  exposed  to  death,  and  the  number  dying. 

Simple  division  will  obtain  the  yearly  cost  per  $1,000  of  protection  at  the  various 
ages  from  year  to  year. 

From  a  recognized  standard  mortality  table  (the  N.  F.  C),  the  following  yearly 
costs  per'$i,ooo  of  protection  have  been  taken  for  ages  20,  21,  22,  23,  24,  25,  30  and  for 
each  quinquennial  age  to  95  and  annually  to  99: 

YEARLY  COSTS  PER  $1,000. 

Age            Cost  Age  Cost  Age  Cost  Age                 Cost 

20 $5.00  30 $5-55  60 $22.75  90 $   368.70 

21 5-04             35 6.15           65 34.39           95 602.74 

22 5.07             40 7.17           70 53.65           96 655.17 

23 5-II              45 8.87           75 85.48           97 700.00 

24 5.15             50 11.44           80 138.09           98 1,000.00 

25 5-20             55 15.71            85 225.08           99 

(The  Table  appears  in  the  Appendix.) 

If  it  is  desired  to  grant  insurance  protection  at  actual  cost,  obviously  a  member 
would  pay  the  amounts  of  the  yearly  costs,  increasing  with  age. 

In  other  words,  if  a  member  took  out  $1,000  insurance  at  age  20,  and  paid  $5.00 
in  the  first  year  from  age  20  to  21,  he  would  pay  the  actual  cost,  the  same  being  his 
share  of  the  expected  death  claims  for  that  year.  When  he  attained  21  years  of 
age,  he  would  contribute  $5.04  as  his  share  of  the  death  losses  for  the  year  from 
age  21  to  22.  Similarly,  for  each1  advanced  year  of  age  his  contribution  should  be 
increased  to  meet  the  increased  insurance  cost. 


161 

He  might  not  die  until  he,  was  98  years  of  age,  nevertheless  the  Society  would 
each  year  take  the  risk  of  his  dying,  and  for  that  protection  he  should  pay  according 
to  the  cost  from  year  to  year. 

The  probability  of  dying  within  the  year  is  assumed  to  become  a  certainty  at 
age  98,  and  hence  the  risk  is  no  longer  contingent,  and  therefore  the  cost  of  $1,000  of 
protection  is  $1,000,  which  is  the  expected  contribution  on  the  basis  of  cost,  and  must 
be  made  in  the  last  year  of  the  longest  expected  life. 

On  the  actual  cost  basis,  the  contribution  corresponds  to  the  yearly  increasing 
costs,  and  consequently  there  must  be  annually  increasing  contributions,  or  their 
equivalents,  in  order  to  have  a  plan  that  will  provide  for  the  Actual  Costs  of  protection. 

NATURAL   PREMIUMS. 

Annually  increasing  contributions,  which  correspond  to  the  yearly  costs,  are  known 
as  "Natural  Premiums." 

There  are  a  number  of  Societies  which  successfully  operate  under  modified  "Nat 
ural  Premium"  plans. 

The  usual  objection  urged  against  the  pure  "Natural  Premium"  plan  is  that  it 
requires  the  largest  contributions  at  the  advanced  ages,  when  members  are  supposed 
to  be  least  able  to  pay. 

To  meet  this  objection,  Societies  have  modified  the  plan  so  as  to  have  the  increase 
in  contributions  discontinue  above  a  designated  age. 

The  majority  of  Societies  operate  under  rates  of  contribution  intended  to  be 
level  and  uniform  from  ages  of  entry,  altogether  avoiding  the  yearly  increase  from 
age  to  age. 

INCREASING  COSTS  OF  PROTECTION. 

The  yearly  increasing  costs  of  protection  must  be  provided  for,  whatever  the 
method  of  contribution. 

Obviously,  the  actual  cost  of  insurance  to  the  Society  cannot  be  affected  by  any 
particular  method  of  making  contributions  to  meet  the  costs. 

The  insurance  costs  increase  with  advance  in  age,  because  the  Law  of  Mortality 
so  decrees. 

The  yearly  increasing  costs  must  necessarily  furnish  the  basis  for  the  determina- 
tion of  contributions,  under  any  and  all  methods. 

The  simplest  and  the  natural  method  would  be  to  have  the  contributions  corres- 
pond to  the  costs — which  is  the  natural  premium  plan. 

However,  the  natural  premium  plan  would  make  rates  so  high  at  extreme  old 
ages  that  the  advantage  of  protection  would  not  justify  the  contribution  to  provide 
for  its  cost.  (See  foregoing  yearly  costs  for  age  70  and  above — the  yearly  costs  being 
the  same  as  the  natural  premiums,  or  increasing  contributions).  The  results  in  prac- 
tical operation  have  been  to  adopt  a  modified  natural  premium  plan,  or  a  level  premium 
plan. 

"LIFE  EXPECTANCY/' 

A  great  many  people  imagine  that  "Life  Expectancy"  enters  into  the  computation 
of  level  rates  of  contribution. 

Recently  a  Texas  jurist,  in  an  otherwise  able  and  learned  opinion,  made  the 
statement  that  the  adequate  level  rate  was  that  amount  which,  placed  at  compound 
interest,  zcould  produce  $1,000  at  the  end  of  life  expectancy. 


162 

Only  the  notorious  lack  of  mathematical  acumen  by  lawyers  can  excuse  this 
wholly  erroneous  statement  by  the  learned  Lone  Star  judge. 

It  is  surprising  that  he  failed  to  test  his  statement  before  solemnly  delivering 
it  in  judgment.  For  example :  4 

The  net  level  annual  premium  for  $1,000  of  insurance  at  age  40,  by  the  American 
Experience  Table  of  Mortality  and  four  per  cent  interest,  is  $22.35. 

The  period  of  "Life  Expectancy"  at  age  40,  by  the  same  table,  is  28.18  years. 

The  amount  of  $22.35  paid  annually  at  four  per  cent  compound  interest  for 
28.18  years  is  $i,  175-39- 

The  net  level  annual  premium  by  the  National  Fraternal  Congress  Table  of 
Mortality  and  four  per  cent  interest,  for  $1,000  of  insurance  at  age  40,  is  $20.11.  The 
period  of  "Life  Expectancy"  by  that  table,  at  age  40,  is  29.9  years.  The  amount  of 
$20.11  paid  annually  and  improved  at  four  per  cent  compound  interest  for  29.9  years 
is  $1,168.19. 

In  both  instances  the  amount,  at  the  end  of  "Life  Expectancy,"  is  in  excess  of 
$1,000.  ,  , 

The  statement  of  the  judge  is  not  only  erroneous,  but  it  is  fallacious  in  the 
failure  to  take  into  consideration  the  fact  that  a  portion  of  the  net  level  annual  pre- 
mium must  be  taken  to  provide  for  the  yearly  costs  of  protection  in  paying  the  claims 
which  must  mature  from  year  to  year.  Hence,  it  is  impossible  to  place  the  whole 
premium  at  compound  interest  annually. 

When  the  member's  share  of  annual  losses  is  deducted  from  the  net  premium, 
and  the  balance  improved  at  four  per  cent  compound  interest  for  the  period  of  "Life 
Expectancy,"  the  net  accumulation,  at  the  end  of  the  period  by  the  American  Experi- 
ence Table  for  28.18  years,  is  $520.32,  and  by  the  National  Fraternal  Congress  Table 
for  29.9  years,  it  is  $550.84.  In  neither  case  is  the  accumulation  at  the  end  of  "Life 
Expectancy"  very  much  more  than  one-half  of  $1,000. 

Many  persons,  without  expert  knowledge,  have  arrived  at  radically  wrong  conclu- 
sions by  the  employment  of  "Life  Expectancy"  and  "Average  Age"  in  their  compu- 
tations. The  general  public,  and,  even  the  courts,  have  been  misled  by  these  plausible 
fallacies.  "Life  Expectancy"  and  "Average  Age"  do  not  enter  into  the  ordinary  com- 
putations of  life  insurance  premiums. 

But  we  must  return  to  the  paramount  consideration  of  the  Insurance  Contract, 
and  an  exposition  of  the  relations  of  the  insurer  and  the  insured  in  respect  of  the 
integrity  of  the  Contract  in  its  twofold  aspect  of  the 

BENEFIT  SIDE  and  the 
CONTRIBUTION  SIDE. 

The  Benefit  Side  involves  the  insurer's  obligation  to  pay  the  promised  benefit, 
whether  it  be  a  death  benefit,  a  disability  benefit,  an  endowment  benefit,  or  an  old 
age  benefit. 

The  insurer  is  not  altogether  responsible  and  reliable  unless  every  precaution  is 
taken  to  assure  the  payment  of  the  promised  benefit  when  it  matures  into  a  claim. 

If  the  promise  is  to  pay  a  benefit  of  $1,000  at  death  of  the  insured,  whenever  that 
event  may  occur,  it  is  no  justifiable  excuse  for  failure  to  provide  for  the  performance 
of  the  promise  by  alleging  that  the  happening  of  the  event  is  uncertain,  and  the 
date  of  its  occurrence  subject  to  chance,  and  therefore  not  ascertainable  by' the  ordi- 
nary rules  of  business. 

The  promise  to  pay  should  not  be  made  if  it  is  impossible  or  doubtful  of  per- 
formance. 


163 

If  it  partakes  of  a  lottery  or  a  gamble,  the  making  of  the  promise  is  in  violation 
of  public  policy,  and  should  be  prohibited. 

In  this  connection,  and  for  emphasis,  I  desire  to  repeat  what  I  have  said  hun- 
dreds of  times  in  public  addresses  and  to  managers  and  officials  of  Fraternal  Bene- 
ficiary Societies,  That  no  Life  or  Casualty  insurance  corporation  should  be  permitted 
to  transact  business  unless  it  could  show  that  it  would  be  able  (under  normal  con- 
ditions) to  carry  out  its  promises  in  good  faith  and  according  to  the  terms  and  tenor 
of  its  contract. 

POSSIBILITY  OF  PERFORMANCE. 

Unless  a  demonstration  oi  possible  performance  can  be  made,  the  law  should 
prohibit  the  promise. 

Then,  What  is  the  demonstration  which  will  show  that  it  is  possible  for  an  insur- 
ance corporation  to  provide  for  the  payment  of  $1,000  on  the  death  of  an  insured 
person  whenever  that  event  may  happen. 

First.  It  could  show  that  it  had  $1,000  in  cash,  or  well  secured  funds  which 
would  be  held  until  the  occurrence  of  the  event,  and  then  used  for  the  payment  of 
the  benefit. 

Second.  It  could  show  that  it  held  the  present  worth  of  the  $1,000  safely  invested 
and  earning  interest  at  a  rate  that  would  increase  the  sum,  representing  the  present 
Tiilitc  of  the  $1,000,  to  the  face  value  of  the  promised  benefit  at  the  date  of  its  matu- 
rity by  death.  . 

Third.  It  could  show  that  it  had  the  offsetting  promise  from  the  insured  person 
to  make  periodical  contributions  to  the  benefit  funds  of  the  corporation,  and  that  the 
frcsent  worth  of  these  promised  contributions  was  equal  in  value  to-  the  present 
worth  of  the  promised  benefit.  And  should  the  insured  person  default  in  his  contri- 
butions the  corporation  thereby  would  be  released  from  the  promise  to  pay  the  benefit. 

When  the  proposition  is  thus  plainly  put,  and  its  purpose  is  understood  and 
appreciated,  it  is  inconceivable  that  any  honest  man  could  urge  objection  to  a  statu- 
tory requirement  for  such  a  demonstration  as  a  condition  precedent  to  doing  business. 

THE  INSURANCE  PROBLEM. 

The  query  often  comes  to  me,  You  tell  us  what  the  demonstration  should  show,  but 

How  are  we  to  determine  the  present  value  of  $1,000  payable  at  an  unknown  date? 

How  are  we  to  determine  the  present  value  of  the  promise  of  the  insurant  to 
make  future  periodical  contributions  when  the  number  may  be  one  or  one  hundred? 

How  are  we  to  determine  definite  provisions  for  so  uncertain  an  event  as  the 
death  of  an  individual  which  may  occur  tomorrow  or  fifty  years  hence? 

These  questions  in  themselves  bear  witness  to  the  peculiar  character  of  life 
insurance,  and  clearly  indicate  the  necessity  for  the  application  of  special  rules  when 
treating  the  Insurance  Contract  as  an  affair  of  business. 

If  $1,000  were  payable  one  year  hence,  and  were  it  desired  to  obtain  the  present 
value  on  the  basis  of  four  per  cent  interest  per  annum,  any  sixth  grade  schoolboy 
could  readily  answer  that  it  was  obtained  by  dividing  1.04  into  $1,000.  Or  taking  the 
present  value  of  $1.00  due  one  year  hence,  .961538,  and  multiplying  by  1,000. 

If  the  $1,000  were  due  ten  years  hence,  multiply  by  .675564,  the  present  value  of 
$1.00  due  ten  years  from  date. 

The  insurance  problem  is  to  find  the  present  value  of  $1,000  payable  at  the  death 
of  the  insured. 


164 

Obviously,  the  answer  is  not  obtained  by  the  simple  use  of  interest  discount  fac- 
tors for  the  very  good  reason  that  these  cannot  be  applied  until  some  time  is  set 
for  the  payment  of  the  principal  sum. 

How  can  a  date  for  maturity  be  determined  when  it  depends  upon  the  uncertainty 
of  a  human  life?  than  which  there  is  nothing  less  certain. 


COOPERATION. 

This  question  develops  and  discloses  the  paradoxical  nature  of  the  life  insurance 
business. 

I  have  said  that  we  must  bring;  under  analysis  the  Insurance  Contract  between 
the  insurer  and  the  insured  before  their  relations  can  be  understood,  equity  estab- 
lished and  success  assured. 

In  answer  to  the  last  question,  I  now  positively  must  assert  that  it  is  a  business 
impossibility  to  enter  into  a  life  insurance  contract  with  a  single  individual  separate 
and  apart  from  other  insurants  similarly  situated. 

The  uncertain  duration  of  the  individual  life  would  make  a  single  contract  for 
life  insurance  a  bet,  or  gamble,  pure  and  simple. 

Mutual  cooperation  is  the  essence  of  life  insurance. 

There  must  be  a  number  of  insured  lives  similarly  conditioned  before  the  single 
risk  is  brought  within  the  operation  of  the  Law  of  Mortality. 

This  Law,  like  all  Laws  of  Nature  in  their  operation,  produces  regularity  and 
continuity  in  the  occurrences  of  deaths  amongst  a  given  number  within  a  given  time 
under  similar  conditions. 

This  Law  makes  no  more  certain  the  duration  of  the  individual  life  of  any  one 
of  the  many  associated  in  mutual  cooperation. 

Its  function  is  to  establish  the  fact  of  regularity  in  the  number  that  may  be 
expected  to  die  within  a  given  period  from  amongst  a  group  of  persons  similarly 
situated. 

We  must,  therefore,  predicate  the  conduct  of  a  life  insurance  business  upon  the 
assumption  of  cooperation  by  a  number  of  persons  associated  for  mutual  protection, 
with  a  managing  corporation  only  as  means  for  the  accomplishment  of  the  desired  end. 

PRESENT  VALUE  OF  THE  BENEFIT. 

To  find  the  present  worth  of  the  promise  to  pay  $1,000  on  the  death  of  an 
individual,  we  must  find  the  present  value  of  similar  promises  to  a  number  of 
insurants  similarly  situated,  and  then  by  division  reduce  the  value  to  the  basis  of 
the  promised  $1,000  benefit. 

Even  then,  before  we  can  make  a  start,  the  Laws  of  Mortality  must  be  brought 
to  a  definite  basis  for  mathematical  treatment. 

This  is  accomplished  by  the  selection  of  some  standard  Mortality  Table,  or  by 
the  construction  of  a  mortality  table  from  the  actual  experience  of  a  life  insurance 
organization,  or  from  some  exhibit  of  vital  statistics. 

In  passing,  it  may  be  recalled  that  the  philosopher  and  scientist,  Dr.  Milne,  could 
not  secure  statistics  from  any  life  insurance  company,  because  such  data  were  not 
available  one  hundred  and  thirty-five  years  ago,  hence  he  had  recourse  to  the  rec- 
ords of  births  and  deaths  of  his  native  village  for  the  statistics  to  reduce  the  Law 
of  Nature  to  tangible,  workable  form. 


16,5 

We  have  the  advantage  of  one  hundred  years  of  practical  operation  in  the 
conduct  of  the  life  insurance  business  should  we  desire  to  refer  to  actual  experience 
for  our  statistics.  Or,  we  can  select  any  one  of  many  Mortality  Tables  already 
at  hand. 

In  another  part  of  this  book  I  have  given  the  several  Tables  constructed  from 
the  experiences  of  forty-three  Fraternal  Beneficiary  Societies,  and  also  the  National 
Fraternal  Congress  and  the  American  Experience  mortality  tables,  together  with 
the  "death  rates"  from  numerous  other  tables. 

For  purposes  of  illustrating  this  -text  I  shall  take  my  figures  from  the  National 
Fraternal  Congress  Table  of  Mortality. 

Bear  in  mind  that  the  object  is  to  obtain  the  present  worth  of  promises  to  pay 
future  benefits  upon  the  death  of  members. 

The  use  of  the  Mortality  Table  is  to  ascertain  the  time  for  payment  of  claims, 
in  order  that  they  may  be  discounted  to  find  their  present  value. 

Referring  to  the  National  Fraternal  Congress  Table  of  Mortality  (appearing  in 
the  Appendix),  it  is  seen  that  at  age  35  (and  we  will  assume  age  35  for  our  pros- 
pective insurant),  92,215  are  the  number  living,  and  of  these  567  are  assumed  to  die 
during  the  year  of  age  35-36. 

Subtracting  567  from  92,215,  it  is  seen  that  the  number  living  at  age  36  is  91,648. 
Of  the  latter  578  die  during  the  year  of  age  36-37. 

The  two  columns  record  the  number  living  at  each  subsequent  age  and  the 
number  dying  during  each  year  of  age,  until  the  last  three  living  at  age  98  die  dur- 
ing the  year  of  age  98-99. 

Assuming  that  each  was  insured  for  $1,000,  the  total  protection  promised  would 
be  $92,215,000  upon  the  issuance  of  the  92,215  contracts. 

According  to  the  Law  of  Mortalit3r,  exemplified  in  this  table,  in  the  first  year  there 
woud  be  567  deaths  maturing  $567,000  of  death  benefits. 

In  actual  practice,  these  deaths  would  occur  from  week  to  week  and  from  month 
to  month  during  the  year,  but  to  simplify  the  succeeding  calculations  it  will  be 
assumed  that  payment  of  claims  is  made  at  the  end  of  the  year. 

Then  the  $567,000  of  death  benefits  would  be  assumed  to  mature  one  year  hence. 
Multiplying  by  the  present  value  of  $1.00  due  in  one  year,  .961538,  the  present  value 
of  $567,000  is  found  to  be  $545,190  (giving  results  by  use  of  five-place  logarithms). 

In  the  second  year  of  insurance  of  the  91,648  living  578  are  expected  to  die, 
maturing  $578,000  in  claims,  assumed  to  be  due  and  payable  at  the  end  of  that  year, 
which  would  be  two  years  from  the  beginning  of  the  Insurance  Contracts.  To  find 
the  present  worth  of  $578,000  due  two  years  hence  multiply  by  the  decimal  .924556, 
which  is  the  present  value  of  $1.00  due  in  two  years. 

From  the  foregoing  it  is  readily  understood  that  the  yearly  instalments  of 
claims  can  be  ascertained  from  the  column  of  the  number  dying  as  given  in  the 
Table  of  Mortality.  When  the  yearly  instalments  have  been  recorded  at  the  ages 
attained  when  matured  into  claims,  each  instalment  can  be  brought  to  present  value 
by  employment  of  the  discount  factor  corresponding  to  the  year  of  expected  maturity 
after  the  beginning  of  the  insurance. 

Here  it  may  be  stated  that  were  it  desired  to  obtain  reults  on  the  basis  of  the 
experience  of  the  forty-three  Societies,  or  of  the  Woodmen  of  the  World,  or  of  the 
Royal  Arcanum,  or  of  the  Knights  of  the  Maccabees  of  the  World,  or  of  the  Knights 
and  Ladies  of  Security,  or  of  any  other  Society  from  whose  experience  a  mortality 
table  has  been  constructed,  then  the  yearly  instalments  of  claims  would  be  secured 
from  the  column  of  the  number  dying  in  such  table. 


166 

Exhibit  i  in  Column  2  gives  the  instalment  of  claims  for  each  of  the  64  years 
from  age  35  to  99,  the  aggregate  being  the  total  of  insurance,  $92,215,000,  issued  at 
age  35.  In  other  words,  by  employment  of  the  mortality  table  we  anticipate  the 
time  when  all  of  the  insured  persons  would  be  dead  and  all  of  the  promised  benefits 
matured  into  claims  by  annual  instalments  as  deaths  are  assumed  to  occur  from 
year  to  year. 

In  column  3  are  given  the  discount  factors  on  the  assumption  of  four  per  interest. 

In  column  4  are  the  products  of  the  factors  by  the  assumed  amount  of  claims, 
for  corresponding  years,  the  results  representing  present  worth  as  at  the  beginning 
of  the  insurance.  That  is  to  say,  $3,000  due  64  years  hence  has  a  present  value  of 
$243.78. 

The  sum  of  the  present  values  in  column  4,  $27,818,663.44,  is  the  present  value 
of  the  sum  of  the  instalments  of  claims,  $92,215,000. 

The  meaning  of  the  Exhibit  is :  If  92,215  persons  were  insured  at  age  35  under 
contracts  promising  a  benefit  of  $1,000  payable  at  the  death  of  each,  it  might  be 
expected — 

That  $567,000  of  the  $92,215,000  would  become  claims  by  deaths  in  the  first  year 
of  insurance,  $578,000  in  the  second  year,  $591,000  in  the  third  year,  and  so  on  for 
succeeding  years ; 

That  64  years  would  expire  before  the  maturity  of  the  last  three  claims  of  $3,000 
in  the  year  of  age  98-9 ; 

That  the  present  worth  of  the  promises  to  pay  $92,215,000  in  benefits  as  they  are 
expected  to  mature  into  claims  from  year  to  year  would  be  $27,818,663.44 ; 

And  that  the  present  value  of  the  promise  to  an  individual  insurant  to  pay  $1,000 
at  his  death  would  be  the  average  present  value,  or  $27,818,663.44  divided  by  92,215, 
equal  $301.68. 

Thus  we  have  solved  the  problem  to  find  the  present  value  of  the  promise  to  pay 
a  benefit  of  $1,000  at  the  death  of  a  person  aged  35  at  date  of  insurance  whenever 
death  may  occur. 

The  $27,818,663.44  represents  the  sum,  if  paid  at  the  time  the  insurance  is  effected, 
that  would  provide  for  all  of  the  yearly  installments  of  claims  to  the  total  of 
$92,215,000,  when  supplemented  by  four  per  cent  compound  interest. 

This  is  called  the  "Single  Premium"  for  the  payment  of  thef  claims  arising  out 
of  the  $92,215,000  of  insurance. 

Reduced  to  the  basis  of  $1,000  (by  dividing  92,215  into  $27,818,663.44),  $301.68  is 
the  "Single  Premium,"  or  single  payment  to  be  made  by  the  person  at  age  35  to 
purchase  an  insurance  of  $1,000  covering  the  whole  period  of  life,  the  sum  insured 
being  payable  at  death  whenever  that  event  occur. 

Obviously,  the  present  value  of  the  sum  insured  is  identical  with  the  single 
payment  for  the  purchase  of  the  sum  insured. 

The  present  value  of  the  promised  benefits  is  equal  to  the  single  payment  to 
assure  the  performance  of  the  promise. 

If  $27,818,663.44  were  improved  at  four  per  cent  interest  for  one  year,  and 
deduct  the  claims  for  the  first  year,  $567,000;  and  improve  the  remainder  at  four 
per  cent  interest  for  another  year,  and  deduct  the  claims  for  the  second  year, 
$578,000;  and  continue  the  process  for  64  years,  the  amount  at  the  end  of  the  sixty- 
fourth  year  would  equal  the  last  instalment  of  claims,  $3,ooo. 

In  this  way  it  can  be  proved  that, 


EXHIBIT  I. 


Years 
of  In- 
surance. 

Yearly  Instalments 
of  Death  Claims. 

Present  Value  of 
f  1.00  Due  n 
Years  Hence. 

Present  Value  of 
Instalments  of 
Doath  Claims. 

1 

$      567,000 

.961538 

$  545,190  00 

2 

578,000 

.924556 

534,390  00 

3 

591,000 

.888996 

525,400  00 

4 

606,000 

.854804 

518,010  00 

5 

622,000—$      2,964,000 

.821927 

511,230  00—  $2,634,220 

00 

6 

640,000 

.790315 

505,800  00 

7 

660,000 

.759918 

501,550  00 

8 

683,000 

.730690 

499,060  00 

9 

708,000 

.702587 

497,430  00 

10 

734,000—        6,389,000 

.675564 

495,870  00—   5,133,930 

00 

11 

761,000 

.649581 

494,320  00 

12 

790,000 

.624597 

493,440  00 

13 

822,000 

.600574 

493,670  00 

14 

857,000 

.577475 

494,890  00 

15 

894,000—      10,513,000 

.555265 

496,410  00—   7,606,660 

00 

16 

935,000 

.533908 

499,210  00 

17 

981,000 

.513373 

503,620  00 

18 

1,029,000 

.493628 

507,950  00 

19 

1,083,000 

.474642 

514,040  00 

20 

1,140,000—      15,681,000 

.456387 

520,270  00—10,151,750 

00 

21 

1,202,000 

.438834 

527,470  00 

22 

1,270,000 

.421955 

535,880  00 

23 

1,342,000 

.405726 

544,480  00 

24 

1,418,000 

.390121 

553,200  00 

25 

1,501,000 

.375117 

563,050  00 

26 

1,588,000 

.360689 

572,770  00 

27 

1,681,000 

.346817 

583,000  00 

28 

1,778,000 

.333477 

592,930  00 

29 

1,880,000 

.320651 

602,820  00 

30 

1,985,000 

.308319 

612,010  00 

31 

2,094,000 

.296460 

620,800  00 

32 

2,206,000 

.285058 

628,840  00 

33 

2,318,000 

.274094 

635,350  00 

34 

2,430,000 

.263552 

640,440  00 

35 

2,539,000          42,913,000 

.253415 

643,410  00—19,008,200 

00 

36 

2,645,000 

.243669 

644,510  00 

37 

2,744,000 

.234297 

642,910  00 

38 

2,832,000 

.225285 

638,000  00 

39 

2,909,000 

.216621 

630,140  00 

40 

2,969,000 

.208289 

618,420  00 

41 

3,009,000 

.200278 

602,630  00 

42 

3,026,000 

.192575 

582,730  00 

43 

3,016,000 

.185168 

558,470  00 

44 

2,977,000 

.178046 

530,040  00 

45 

2,905,000 

.171198 

497,340  00 

46 

2,799,000 

.164614 

460,750  00 

47 

2,659,000 

.158283 

420,870  00 

48 

2,485,000 

.152195 

378,210  00 

49 

2,280,000 

.  146341 

333,660  00 

50 

2,050,000 

.140713 

288,460  00 

51 

1,800,000 

.135301 

243,540  00 

52 

1,539,000 

.  130097 

200,220  00 

53 

1,277,000 

.125093 

159,740  00 

54 

1,023,000 

.  120282 

123,050  00 

55 

788,000 

.115656 

91,136  00 

56 

579,000 

.111207 

64,389  00 

57 

404,000 

.  106930 

43,200  00 

58 

264,000 

.102817 

27,144  00 

59 

161,000 

.098863 

15,917  00 

80 

89,000 

.095060 

8,460  40 

61 

44,000 

.091404 

4,021  80 

62 

19,000 

.087889 

1,669  90 

63 

7,000 

.084508 

591  56 

64 

3,000 

.081258 

243  78 

$  92,215,000 

1  27,8  18,663  44 

168 

The  present  value  of  the  promised  benefits  must  be  equal  to  the  single  payment 
to  assure  the  performance  of  the  promise,  and 

That  is  the  demonstration  which  should  be  required  of  every  life  insurance 
organization  before  being  permitted  to  make  promises  for  the  payment  of  future 
benefits  upon  the  death  of  citizens  of  any  State  or  Province. 

If  the  applicant  for  life  insurance  protection  were  45  instead  of  35  years  of  age, 
the  process  for  finding  the  present  value,  or  "Single  Premium,"  of  the  promise  to 
pay  $1,000  at  his  death  would  be  identical  with  that  explained  for  age  35,  differing 
only  in  the  fact  that  the  Mortality  Table  would  be  entered  at  age  45,  instead  of  at 
35,  and  the  first  yearly  instalment  of  claims  would  be  $761,000  on  account  of  the 
761  deaths  during  the  year  amongst  the  85,826  persons  living  at  age  45- 

Similarly  for  applicant  at  age  20.  The  Table  would  be  entered  at  that  age, 
the  first  yearly  instalment  of  claims  being  $500,000  on  the  100,000  living  at  age  20. 

There  would  be  a  total  of  $85,826,000  of  claims,  and  54  yearly  instalments  to 
be  dicounted  for  the  entrants  at  age  45,  while  the  total  would  be  $100,000,000,  and 
there  would  be  79  yearly  instalments  of  claims  for  the  entrant  at  age  20. 

The  present  value  of  the  promise  to  pay  $1,000  at  the  death  of  the  entrant  at  age 
45  would  be  $391.25,  and  at  age  20  it  would  be  $211.86.  These  amounts  represent, 
the  "Single  Premium"  for  the  purchase  of  $1,000  insurance  at  the  respective  entry 
ages. 

The  present  value  of  the  promise  to  pay  $1,000  at  the  death  of  a  member  aged  70 
would  be  $705.18,  representing  the  "Single  Premium"  for  the  purchase  of  $1,000  whole 
life  insurance  at  age  70. 

A  second  reading  of  the  foregoing  explanation  is  justified  by  its  importance,  since 
a  thorough  understanding  of  the  process  to  determine  the  present  value  of  the  prom- 
ised benefit  is  necessary  for  ready  comprehension  of  the  process  to  determine  the 
amount  of  the  level  annual  contribution  rate  adequate  to  provide  for  the  promised 
benefit. 

Before  re-reading,  have  fixed  in  mind  the  fact  that  the  column  of  the  number 
dying  during  each  year  of  age,  as  shown  by  the  selected  Mortality  Table,  determine 
the  yearly  instalments  of  claims  for  the  period  covered  by  the  promise  of  protec- 
tion, whether  that  period  be  for  the  whole  term  of  life  or  for  a  shorter  stipulated 
term,  and  from  these  yearly  instalments  of  claims  is  obtained  the  present  value  of 
the  benefits  promised  to  be  paid  during  such  term. 

For  illustration:  If  the  promise  were  to  pay  a  benefit  of  $1,000  provided  death 
occur  before  age  70,  and  the  insurance  was  taken  at  age  35,  then  on  $92,215,000  the 
total  of  expected  benefit  payments  would  be  the  sum  of  the  claims  in  column  2  ex- 
pected to  mature  during  the  period  of  35  years  from  age  35  to  age  70  amounting  to 
$42,913,000.  The  total  of  the  present  values  of  the  instalments  of  yearly  claims  is 
the  sum  of  the  values  in  column  4  for  the  35  years  from  age  35  to  age  70,  amounting 
to  $19,008,200. 

Note  carefully : 

The  present  value  of  $92,215,000  of  life  insurance  benefits,  promised  to  be  paid 
•whenever  death  occur,  covering  the  whole  period  of  life,  is  $27,818,663. 

The  present  value  of  $92,215,000  of  life  insurance  benefits,  promised  to  be  paid 
if  death  occur  prior  to  age  70,  covering  a  period  of  35  years,  is  $19,008,200. 

The  total  amount  of  claims  expected  under  the  whole  life  contract  on  the  $92,- 
215,000  of  promised  protection  is  $92,215,000. 


169 

The  total  amount  of  claims  expected  under  the  term  contract  to  age  70  on  the 
$92,215,000  of  promised  protection  is  $42,913,000. 

The  present  value  (single  payment)  of  $1,000,  under  a  term  contract  to  age  70, 
is  $19,008,200  divided  by  92,215,  equal  $206.12 — as  against  $301.68  on  the  whole  life 
contract. 

Under  a  term  contract  for  twenty  years,  of  $92,215,000  face  value  of  insurance 
at  age  35,  it  would  be  expected  that  $15,681,000  would  mature  into  claims  (the  sum 
of  column  2  for  20  years),  the  present  value  of  which  would  be  $10,151,750.  The 
present  value  (or  single  payment)  on  $1,000  would  be  $10,151,750  divided  by  92,215 
equal  $110.09. 

On  a  15-year  term  the  insurance  would  be  $92,215,000;  the  expected  claims  would 
be  $10,513,000;  their  present  value,  $7,606,660;  and  the  present  value  of  $1,000  would 
be  $82.49. 

On  a  lo-year  term  the  figures  would  be:  Insurance,  $92,215,000;  total  expected 
claims,  $6,389,000;  total  present  values,  $5,133,930;  present  value  of  $1,000,  $55.67. 

On  a  5-year  term  the  figures  would  be:  Insurance,  $92,215,000;  total  claims,  $2,964,- 
ooo;  present  value,  $2,634,220;  present  value  of  $1,000,  $28.67. 

PRESENT  VALUE  OF  THE  CONTRIBUTION. 

It  is  exceptional  for  a  person  to  pay  one  premium  for  life  insurance. 

Ordinarily  it  is  desired  that  the  contributions  be  made  annually,  semi-annually, 
quarterly,  or  monthly,  and  that  they  continue  through  the  whole  period  of  life  or 
for  a  limited  number  of  years. 

Let  it  be  assumed  that  the  contributions  are  to  be  annually  in  advance  and  to 
continue  until  death. 

The  question  returns,  How  is  the  annual  contribution  to  provide  for  $1,000  of 
insurance  to  be  determined? 

I  have  heard  hundreds  of  well-informed  men  explain  the  method  of  computation 
as  did  the  learned  Texas  Judge  heretofore  quoted,  who  stated  that  "the  adequate  level 
contribution  rate  was  that  amount  which  placed  at  compound  interest  would  produce 
$1,000  at  the  end  of  life  expectancy." 

Many  others  have  said  that  the  proper  annual  level  rate  could  be  obtained  by 
dividing  the  "single  premium,"  or  present  value  of  the  sum  insured  by  the  years  of 
life  expectancy.  Thus :  For  the  whole  life  annual  level  premium  for  $1,000  at  age 
35  divide  $301,68  by  34,  which  would  give  about  $9  instead  of  the  true  net  rate  of 
$16.62. 

A  very  intelligent  and  well-educated  man,  and  altogether  of  fine  business  capacity, 
several  years  ago  announced  that  he  had  solved  the  problem  of  an  equitable  and 
adequate  contribution  rate,  and  he  founded  a  society  to  exploit  the  plan.  A  number  of 
societies  now  operate  upon  similar  plans.  The  scheme,  generally  described,  is 
somewhat  as  follows : 

The  single  premium  is  divided  by  the  number  of  years  of  life  expectancy  to  de- 
termine the  annual  level  contribution  rate.  If  the  member  dies  before  the  end  of 
life  expectancy,  the  amount  of  the  single  premium,  less  the  number  of  assessments 
paid,  is  deducted  from  the  face  of  the  certificate. 

Thus:  Single  premium  at  age  35,  $301.68;  years  of  life  expectancy,  34;  level  annual 
rate,  $301.68  divided  by  34  equal  $8.88  per  annum  per  $1,000,  or  72  cents  per 
month.  The  member  pays  twenty-four  monthly  assessments  and  dies.  His  bene- 
ficiaries receive  $1,000  minus  ($301.68  minus  $17.76)  equal  $716.08. 


170 

The  effect  of  the  plan  is  to  have  an  increasing  insurance,  beginning  with  $698.32 
($1,000  minus  $301.68)  and  increasing  72  cents  with  each  monthly  contribution  until 
the  amount  equals  the  face  of  the  certificate  at  the  end  of  life  expectancy. 

The  effect  of  operation  under  this  plan  was  exaggerated,  and  in  consequence 
the  contribution  rates  were  made  too  low.  The  manner  of  obtaining  them  was  alto- 
gether erroneous. 

This  brings  us  to  the  correct  method  for  the  determination  of  the  adequate  level 
rate,  which  is  preceded  by  the  determination  of  the  single  premium  for  an  annuity. 

Again  recourse  must  be  had  to  the  Mortality  Table. 

Turn  to  the  Table  in  the  Appendix  and  find  opposite  age  35,  in  the  column  giving 
the  number  living,  92,215  as  the  first  factor  in  the  computation. 

Assume  that  the  92,215  persons  agree  to  contribute  $1.00  at  the  beginning  of  each 
year  for  the  whole  period  of  their  lives. 

We  would  have  at  the  beginning  of  the  first  year  $92,215. 

From  the  Table  we  find  that  91,648  are  expected  to  be  living  at  the  beginning  of 
second  year,  at  age  36,  and  hence  we  expect  a  second  contribution  of  $91,648  one? 
year  hence. 

From  the  Table  we  find  that  91,070  are  expected  to  be  living  at  the  beginning  of 
the  third  year,  at  age  37,  and  we  expect  to  receive  at  the  beginning  of  the  third 
year  a  contribution  of  $91,070. 

From  the  Table  we  find  that  3  are  expected  to  be  living  at  the  beginning  of  tho 
64th  year,  at  age  98,  and  we  expect  to  receive  from  them  our  64th  annual  contribution 
of  $3.00. 

Under  the  assumption  we  have  the  promise  of  contributions  at  the  beginning  of 
each  year  of  $1.00  from  each  survivor,  therefore,  $1.00  times  the  number  of  living 
at  each  year  of  age  will  give  the  expected  yearly  instalments  of  contributions  for 
the  64  years,  at  the  expiration  of  which  all  of  the  contributors  are  assumed  to 
be  dead. 

Exhibit  2  gives,  in  column  2,  the  yearly  instalments  of  promised  contributions; 
in  column  3  are  the  interest  discount  factors  (being  unity  at  beginning  of  first  year, 
because  the  first  instalment  is  paid  in  advance)  ;  and  in  column  4  are  the  present 
values  of  the  yearly  instalments  of  the  promised  contributions,  being  the  product 
of  column  2  by  column  3. 

The  total  of  the  promised  contributions  is  $3,167,619,  and  the  total  of  the  present 
values  of  the  yearly  instalments  is  $1,674,337.74. 

The  $1,674,337.74  is  the  single  payment  that  could  be  made  at  age  35  as  the 
equivalent  of  $1.00  annually  to  be  contributed  at  the  beginning  of  each  year,  by 
each  of 'the  survivors  of  the  92,215  entrants. 

An  annual  payment  is  known  as  an  "Annuity,"  because  it  is  a  sum  of  money 
paid  annually. 

The  above  results  might  be  stated  to  show  that  for  a  present  sum  in  one  payment 
of  $1,674,337.74,  the  92,215  persons  could  purchase  life  annuities  of  $1.00  each,  payable 
annually  in  advance,  because  the  present  sum  of  $1,674,337.74,  improved  at  4  per  cent 
compound  interest,  will  provide  for  the  yearly  instalments  of  $1.00  to  each  living  per- 
son (on  the  assumptions  of  the  National  Fraternal  Congress  Table  of  Mortality). 

Any  one  can  make  proof  of  the  statement  by  deducting  from  the  present  sum, 
$92,215  (as  the  first  instalment  or  annuity  payment  to  the  92,215  entrants)  ;  and 
then  improve  the  remainder  at  4  per  cent  interest  for  one  year  and  deduct  $91,648  (as 
the  second  annuity  payment  to  the  91,648  living  at  the  beginning  of  the  second 


EXHIBIT  II. 


Begin- 
ning of 
Yrs.of 
ns. 

Amount  of  Annual 
Contributions  at 
$1.00  per  Member. 

Present  Value  of 
$1.00  Due  n  Years 
Hence. 

Present  Value  of 
Yearly  Instalments 
of  Contributions. 

1 

$      92,215 

1.000000 

$      92,215.00 

2 

91,648 

.961538 

88,123.30 

3 

91,070 

.924556 

84,199.50 

4 

90,479 

.888996 

80,435.80 

5 

89,873—$    455,285 

.854804 

76,824.80—$    421,798 

.40 

6 

89,251 

.821927 

73,358.90 

7 

88,611 

.790315 

70,031.70 

8 

87,951 

.759918 

66,836.60 

9 

87,268 

.730690 

63,766.90 

10 

86,560-       894,926 

.702587 

60,816.90—    756,609. 

40 

11 

85,826 

.675564 

57,982.10 

12 

85,065 

.649581 

55,257.50 

13 

84,275 

.624597 

52,639.00 

14 

83,453 

.600574 

50,120.80 

15 

82,596—  1,316,141 

.577475 

47,698.20—  1,020,307 

.00 

16 

81,702 

.555265 

45,367.30 

17 

80,767 

.533908 

43,123.20 

18 

79,786 

.513373 

40,960.90 

19 

78,757 

.493628 

38,877.70 

20 

77,674—  1,714,827 

.474642 

36,868.40—  1,225,504 

.50 

21 

76,534 

.456387 

34,930.10 

22 

75,332 

.438834 

33,059.30 

23 

74,062 

.421955 

31,251.90 

24 

72,720 

.405726 

29,505.40 

25 

71,302 

.390121 

27,817.40 

26 

69,801 

.375117 

26,184.40 

27 

68,213 

.360689 

24,604.50 

28 

66,532 

.346817 

23,075.20 

29 

64,754 

.333477 

21,594.80 

30 

62,874 

.320651 

20,161.40 

31 

60,889 

.308319 

18,773.90 

32 

58,795 

.296460 

17,431.00 

33 

56,589 

.285058 

16,131.80 

34 

54,271 

.274094 

14,875.90 

35 

51,841—  2,699,336 

.263552 

13,663.30—  1,578,564 

.SO 

36 

49,302 

.253415 

12,494.10 

37 

46,657 

.243669 

11,369.30 

38 

43,913 

.234297 

10,289.10 

39 

41,081 

.225285 

9,255.40 

40 

38,172 

.216621 

8,269.20 

41 

35,203 

.208289 

7,332.70 

42 

32,194 

.200278 

6,448.00 

43 

29,168 

.  192575 

5,617.30 

44 

26,152 

.185168 

4,842.80 

45 

23,175 

.178046 

4,126.40 

46 

20,270 

.171198 

3,470.40 

47 

17,471 

.164614 

2,876.10 

48 

14,812 

.158283 

2,344.60 

49 

12,327 

.152195 

1,876.20 

50 

10,047 

.146341 

1,470.40 

51 

7,997 

.140713 

1,125.30 

52 

6,197 

.  135301 

838.50 

53 

4,658 

.  130097 

606.00 

54 

3,381 

.  125093 

423.00 

55 

2,358 

.120282 

283.60 

56 

1,570 

.115656 

181.60 

57 

991 

.111207 

110.20 

58 

587 

.  106930 

62.80 

59 

323 

.102817 

33.20 

60 

162 

.098863 

16.00 

61 

73 

.095060 

6.90 

62 

29 

.091404 

2.70 

63 

10 

.087889 

88 

64 

3 

.084508 

26 

§3,  167,  61  9 

$1,674,337.74 

172 

- 

year)  ;  and  proceeding  in  a  similar  manner  to  the  64th  year,  when  it  will  be  found  that 
$3.00  are  on  hand  to  pay  the  3  survivors  at  the  beginning  of  the  year  of  assumed 
existence. 

Dividing  $1,674,337.74  by  92,215  we  obtain  $18.16  (nearly)  as  the  present  value, 
or  "Single  Premium,"  for  a  Life  Annuity  of  $1.00  beginning  at  age  35. 

THE  LEVEL  ANNUAL  PREMIUM. 

Having  obtained  the  Single  Premium  ($301.68)  for  a  promised  benefit  of  $1,000 
payable  at  death  whenever  that  event  may  occur; 

Having  obtained  the  Single  Premium  ($18.16)  for  a  promised  payment  of  $1.00 
annually  until  death; 

We  are  now  in  position  to  solve  the  problem  as  to  the  amount  of  the  Level  Annual 
Contribution  to  provide  for  a  promised  Death  Benefit  of  $1,000. 

The  solution  is  effected  by  establishing  the  relations  between  the  Single  Premium 
for  the  Insurance  and  the  Single  Premium  for  the  Annuity — that  is,  between  the 
present  value  of  the  Promised  Benefit  payable  at  death  and  the  present  value  of 
the  Promised  Annual  Contribution  payable  until  death. 

Note  the  simplicity  of  the  equation: 

If  $18.16  will  provide  for  $1.00  payable  annually  until  death,  then  a  present  sum 
of  $301.68  will  provide  for  $16.62  payable  annually  until  death,  being  the  quotient  of 
$301.68  divided  by  $18.16. 

That  is  to  say,  $16.62  paid  annually  is  the  equivalent  of  $301.68  paid  in  one  sum. 
Or,  $301.68  is  the  present  value  of  an  annual  contribution  of  $16.62  payable  during 
life; 

But  $301.68  is  also  the  present  value  of  a  Benefit  of  $1,000  payable  at  death; 

Or  $301.68  is  the  Single  Payment  required  to  provide  for  the  Benefit  of  $1,000 
payable  at  death; 

Then  $16.62,  payable  annually  until  death,  being  the  equivalent  of  $301.68  paid 
in  one  sum,  must  be  the  annual  contribution  required  to  provide  for  the  promised 
Benefit  of  $1,000  payable  at  death. 

It  has  taken  many  words  and  much  space  to  make  a  plain  and  untechnical  ex- 
planation of  the  method  to  determine  the  level  annual  contribution  at  age  35  to 
provide  for  the  promise  of  $1,000  payable  at  death,  but  I  feel  justified  in  the  effort 
because  of  the  prevailing  unfamiliarity  with  the  subject  by  capable  and  successful 
managers. 

However,  the  whole  matter  resolves  itself  into  the  calculation  of  Single  Premiums 
for  Insurance  and  Single  Premiums  for  Annuities,  and  with  the  first  as  dividends 
and  the  second  as  divisors,  the  quotients  will  be  the  required  Level  Annual  Con- 
tribution Rates. 

Thus :  To  find  the  level  annual  contribution  (paid  in  advance)  to  provide  for 
$1,000  at  death  prior  to  age  70; 

Divide  92,215  into  $1,578,564.80,  the  sum  of  the  present  values  of  the  yearly  in- 
stalments of  contributions  for  the  35  years  (35-?o),  to  obtain  $17.12,  the  Single 
Premium  for  an  Annuity  payable  to  age  70. 

Then  divide  $206.12,  the  Single  Premium  to  provide  $1,000,  payable  at  death  prior 
to  70,  by  this  temporary  annuity  $17.12,  and  the  result  is  $12.04,  the  required  Level 
Annual  Contribution  to  provide  $1,000  payable  at  death  prior  to  age  70. 

For  the  Level  Annual  Contribution  for  $1,000  at  age  35  on  a  2O-year  term  contract, 


173 

Divide  $1,225,504.50  by  92,215,  obtaining  $13.29,  the  value  of  the  temporary  an- 
nuity, and  dividing  this  into  $110.09,  the  single  premium  for  the  temporary  insurance, 
we  obtain  $8.28  as  the  required  rate. 

By  a  similar  process  (using  the  side  totals  in  the  two  exhibits)  the  Level  Annual 
Contribution  Rate  can  be  obtained  for  15  and  10  and  5-year  terms  for  entry  age  35. 

Exhibits  could  be  prepared  for  other  ages  of  entry  and  values  computed  by  follow- 
ing the  procedure  set  forth  in  the  given  illustration. 

It  is  well  to  explain  that  the  Level  Whole  Life  Annual  Contribution  Rate  could 
have  been  directly  obtained  by  dividing  $1,674,337.74  (the  present  value  of  yearly 
instalments  of  $1.00  contributions)  into  $27,818,663.44  (the  present  value  of  the 
yearly  instalments  of  claims). 

And  similarly  the  annual  contribution  for  Term  to  age  70  could  be  found  by 
dividing  $1,578,564.80  into  $10,008,200.00.  For  2O-YearTerm,  $1,225,504.50  into  $10,- 
151,750.00.  And  similarly  for  the  other  terms. 

In  other  words  if  the  sum  of  the  present  values  of  the  yearly  instalments  of 
claims  on  the  basis  of  $1,000  per  member  is  divided  by  the  sum  of  the  present  values 
of  the  yearly  instalments  of  contributions  on  the  basis  of  $1.00  per  member,  the 
quotient  will  be  the  level  annual  contribution  rate  to  provide  for  the  $1,000  death  benefit. 

The  employment  of  this  principle  gives  a  short  cut  for  the  determination  of  the 
Single  Premium  for  Insurance,  the  Single  Premium  for  an  Annuity  and  the  Level 
Annual  Premium. 

This  shorter  process  consists  of  a  summation  of  the  column  of  present  values  of 
promised  benefits  and  the  column  of  present  values  of  promised  contributions  (columns 
4  of  Exhibits  I  and  2),  beginning  the  summation  at  the  64th  item  and  taking  sub- 
totals in  summing  upward  to  the  first  year  at  age  of  entry.  From  the  summed 
columns  readily  can  be  gotten  the  dividend  and  divisor  to  obtain  the  level  annual 
contribution  rate  as  above  indicated.  This  process  is  explained  in  more  detail  in 
the  treatment  of  "Commutation  Columns." 

The  level  annual  premiums  for  limited  payment  contracts  and  endowment  con- 
tracts can  be  obtained  from  the  present  values  of  instalments  of  claims  and  present 
value  of  the  instalments  of  contributions  in  a  similar  way  to  that  of  determining 
the  level  annual  premium  for  whole  life  contracts  and  for  term  contracts. 

It  has  been  shown  that  by  dividing  the  sum  of  the  instalments  of  claims  $27,818,- 
663.44  by  the  sum  of  the  present  values  of  the  instalments  of  contributions,  $1,674,- 
337-74,  the  net  level  annual  premium  for  a  whole  life  contract  on  $1,000  at  age  35 
is  obtained,  and  it  has  been  shown  that  if  we  divide  the  sum  of  the  present  value  of 
the  instalment  of  claims  for  20  years,  $10,151,750,  by  the  sum  of  the  present  values 
of  the  instalments  of  contributions  for  20  years,  $1,225,504.50,  we  obtain  $8.28,  the 
level  annual  premium  for  a  term  contract  for  twenty  years,  to  provide  for  $1,000 
payable  at  death  within  that  period. 

If  now  we  want  the  net  level  annual  premium  for  a  whole  life  contract  where  the 
benefit  is  payable  at  death  whenever  that  event  occur,  but  the  contributions  are 
limited  to  20  years,  we  would  divide  the  sum  of  all  the  present  values  of  the 
instalments  of  claims,  $27,818,663.44,  by  the  sum  of  the  present  values  of  the  instal- 
ments of  contributions  for  20  years,  $1,225,504.50,  giving  us  $22.70  as  the  net  level 
annual  premium  lo  provide  for  $1,000  death  benefit  whenever  that  even  may  occur 
with  the  contributions  limited  to  20  annual  payments. 


174 

If  we  wanted  to  limit  the  number  of  annual  contributions  to  15,  then  we  would 
divide  $27,818,663.44  by  $1,020,307.  Similarly  we  would  divide  by  the  sum  of  the 
present  values  of  the  instalments  of  contributions  for  10  years  or  5  years  to 
obtain  the  level  annual  premium  for  whole  life  protection  with  the  contributions 
limited  to  10  or  5  payments. 

The  annual  premium  for  an  endowment  insurance  is  made  up  of  the  sum  of  an 
annual  premium  for  term  insurance  and  an  annual  premium  for  "pure  endowment" 
insurance.  To  obtain  the  net  annual  premium  for  a  2O-year  endowment  policy,  we 
would  take  the  annual  premium  for  the  2O-year  term,  $8.28,  and  add  it  to  the  premium 
for  a  pure  endowment. 

An  endowment  insurance  contract  promises  to  pay  the  sum  insured  at  the  end 
of  the  stated  period  or  to  pay  the  sum  insured  at  prior  death.  If  we  have  under 
consideration  a  20-year  endowment  insurance  contract,  then  the  2O-year  term  level 
annual  rate  of  $8.28  for  entry  age  35  would  provide  for  the  $1,000  payable  at  death 
within  the  period  20  years,  and  this  $8.28  is  obtained  as  heretofore  explained. 

The  endowment  would  provide  for  the  payment  of  $1,000  to  each  of  the  survivors 
at  the  end  of  the  20  years.  By  reference  to  the  mortality  table,  in  the  column  of  the 
number  living  opposite  age  55  (the  end  of  20  years  from  age  35),  we  find  that  the 
number  of  survivors  are  76,534,  and  each  one  of  these  receiving  $1,000  would  make 
$76,534,000  that  we  must  have  on  hand  at  the  end  of  20  years  in  order  to  pay  the 
promised  endowments.  By  reference  to  column  4  of  Exhibit  2  we  find  that  at  the 
end  of  the  twentieth  year  (the  beginning  of  the  twenty-first  year)  that  the  value  of 
$76,534  is  $34,930.10,  and  hence  the  value  of  $76)534,000  would  be  1,000  times  $34,930.10 
or  $34,930,100. 

This  latter  amount,  $34,930,100,  is  the  present  value  or  the  single  premium  at 
age  35  of  $76,534,000  payable  at  the  end  of  20  years.  All  of  the  living  members  at 
the  beginning  of  each  of  the  20  years  must  contribute  toward  the  payment  of  the 
endowment  of  $76,534,000,  and  by  reference  to  column  2  of  Exhibit  2  it  is  seen  that 
the  survivors  would  contribute  at  $1.00  each  the  sum  of  $1,714,827,  the  present  value 
of  which  would  be  $1,225,504.50. 

Dividing  the  single  premium  for  the  pure  endowment,  $34,930,100,  by  the  above 
"temporary  annuity"  of  $1,225,504.50,  we  obtain  $28.50  as  the  required  net  annual 
level  premium  per  $1,000  for  the  pure  endowment  insurance. 

Adding  $28.50  to  the  annual  premium  for  20-year  term,  $8.28,  we  have  $36.78 
as  the  required  annual  premium  per  $1,000  for  the  endowment  insurance  at  age  35. 

As  stated,  the  level  annual  premium  of  $8.28  per  $1,000  paid  by  each  of  the  sur- 
vivors beginning  with  92,215  entrants  at  age  35,  will  provide  for  the  total  of  $15,681,000 
of  death  claims  which  are  expected  to  mature  during  the  20  years,  while  the  level 
annual  premium  of  $28.50  will  provide  for  the  76,534  endowments  which  are  expected 
to  mature  at  the  end  of  the  20  years,  and  of  course  the  sum  of  these  two  level 
annual  premiums,  $36.78,  will  provide  for  the  death  claims  that  mature  during  the 
20  years,  and  also  the  endowments  which  mature  at  the  end  of  the  20  years. 

From  the  above  it  will  be  appreciated  that  Exhibits  i  and  2  give  the  basis  for  the 
determination  of  level  annual  premiums  to  provide  for  death  benefits  and  endowments 
under  many  forms  of  contracts.  Similar  columns  to  those  given  in  Exhibits  I  and  2 
are  prepared  which  facilitate  the  computation  of  contribution  rates,  and  these  are 
known  as  "commutation  columns,"  which  hereafter  will  be  explained. 


175 
GENERAL  STATEMENT. 

For  emphasis,  I  will  restate  some  of  the  general  propositions  which  have  hecn 
illustrated. 

1.  The  single  premium  for  insurance  is  the  present  value  of  the  promised  death 
benefits. 

2.  The  single  premium  for  insurance,  at  the  inception  of  the  contract,  is  equal  to 
the  present  value  of  the  future  level  annual  contribution. 

3.  The    single    premium    for    insurance    divided    by    the    single    premium    for    an 
annuity    will    give    the    level    annual    premium    to    provide    for    the    promised    death 
benefit. 

4.  The  mortality  table  to  be  used  in  the  computation  of  the  single  premium   for 
insurance  and  the  single  premium  for  annuities,  may  be  constructed  from  any  reliable 
and    sufficient    data    derived    from   the    single    or    combined    experience    of    insurance 
organizations.     Since  the  values  are  derived  from  the  numbers  living  and  numbers 
dying  according  to  the  actual  past  experience  of  organizations,  the  result  of  computa- 
tions must  reflect  what  will  be  anticipated  in  the  future  experience,  and  managers  of 
such    organizations    will   make    a   grievous    error   if  they   are   not    guided   by   results 
obtained  as  hereinbefore  indicated. 

5.  The   level    annual   premium   is   obtained    without   regard   to   any   division    into 
"mortality"   and   "reserve"   elements.     It   is   a   fallacy  to   suppose  that   the   "reserve" 
and   "mortality"  elements  are   separately  computed.     The  separation  of  the  net  level 
annual   rate   into  the   "mortality   element"   and  the   "reserve   element"   is   a   fiction   in 
so  far  as  the  computation  of  the  level  rate  is  concerned.     The  reserve  accumulation 
is  ascertained  after  the  net  level  annual  contribution  rate  has  been  determined. 

ANOTHER  METHOD  OF  COMPUTATION. 

It  has  been  suggested  that  the  explanation  of  the  methods  for  the  determination 
of  single  and  annual  premiums  cannot  be  made  too  clear,  and  following  this  sug- 
gestion I  submit  another  method  of  computation  by  the  use  of  the  "probabilities  of 
living"  and  "probabilities  of  dying,"  instead  of  the  "number  living"  and  "number 
dying." 

Referring  to  the  National  Fraternal  Congress  Mortality  Table  at  age  35,  the 
number  living  is  found  to  be  92,215,  and  the  number  dying  during  the  year  of  age, 
35-36,  is  567.  By  dividing  the  number  living  into  the  number  dying  the  "probability 
of  dying"  in  the  first  year  is  found  to  be  .006149. 

The  number  dying  in  the  next  year  of  age,  36-37,  is  578.  By  dividing  92,215,  the 
number  living  at  age  35,  into  578,  the  number  dying  at  age  36,  we  obtain  .006268  as 
the  "probability  of  dying"  in  the  second  year  after  entry  at  age  35. 

The  number  dying  at  age  37  is  recorded  as  591,  and  dividing  this  by  92,215,  the 
number  living  at  age  35,  we  find  the  "probability  of  dying,"  .006409,  in  the  third  year 
after  entry  at  age  35. 

By  dividing  the  number  92,215,  living  at  age  35,  into  the  number  dying  at  any 
advanced  age,  the  "probability  of  dying"  in  the  year  at  that  advanced  age  can  be 
obtained. 

The  probability  of  dying  in  the  current  year  is  obtained  by  dividing  the  number 
living  at  the  beginning  of  the  current  year  into  the  number  dying  during  the 
current  year  of  age — as  567  divided  by  92,215.  In  life  insurance  the  probabilities  of 
dying  within  the  current  year  at  the  different  ages  are  employed  to  determine  the 
current  yearly  costs  of  protection  as  hereinbefore  shown  as  "Natural  Premiums." 


176 

The  probability  of  dying  in  the  first  year,  or  the  second,  or  the  third,  or  any 
other  year  after  entry  is  made  the  basis  for  the  computation  of  the  single  premium 
for  insurance,  the  probabilities  of  dying  in  the  respective  years  being  assumed  as 
the  anticipated  yearly  costs  of  protection  for  those  years. 

That  is  to  say,  the  probability  of  dying  in  the  first  year  being  .006149  (as  above), 
on  the  basis  of  $1,000  it  can  be  assumed  that  $6.149  would  be  the  year's  cost  to  the 
society  for  assuming  the  risk  of  paying  $1,000  in  the  event  of  death  during  the 
current  year. 

It  has  also  been  shown  that  .006268  is  the  probability  at  age  35  of  dying  in  the 
second  year,  and  the  society  could  accept  $6.268  as  the  expected  cost  for  the  risk 
on  $1,000  in  the  second  year  of  insurance. 

And  the  society  could  accept  $6.409  as  the  cost  for  the  risk  in  the  third  year, 
if  the  payment  were  made  in  advance  at  age  35  (without  discount). 

If  the  member  waited  until  he  reached  age  36,  then  the  current  cost  for  the 
year  37-38  would  be  $6.490,  instead  of  $6.409  where  he  made  an  advance  arrange- 
ment at  age  35  for  the  insurance  in  the  third  year. 

However,  if  the  insurant  desired  to  make  this  advance  contract,  yearly  costs 
could  be  discounted  in  like  manner  to  the  discounting  of  the  yearly  instalments 
of  claims,  and  the  sum  of  these  discounted  values  would  be  the  Single  Premium  for 
the  Insurance.  The  process  follows,  assuming  age  of  entry  35,  mortality  according 
to  the  National  Fraternal  Congress  Table  and  interest  at  four  per  cent : 


(1) 

6.149 
6.268 
6.409 
6.572 
6.745 
6.940 
7.157 
7.407 
7.678 
7.960 

X 
X 
X 
X 
X 
X 
X 
X 
X 
X 

(2) 
.961538=$ 
.924556  = 
.888996  = 
.854804  = 
.821927  = 
.790315  = 
.759918  = 
.730690  = 
.702587  = 
.675564  = 

(3) 
5.9122 
5.7951 
5.6975 
5.6174 
5.5440 
5.4850 
5.4389 
5.4119 
5.3943 
5.3773 

$69.285 


$55.6736 


Column  1  gives  the  Insurance 
Cost,  derived  from  the  Probability 
of  dying  during  ten  years. 

Column  2  gives  the  present 
value  of  One  Dollar  due  in  1,  2, 
etc.,  years,  at  4%  Interest. 

Column  3  gives  the  discounted 
values  of  the  Cost  of  Insurance, 
the  sum  of  which  is  ($55.6736)  the 
Present  Value  of  all  of  these  dis- 
counted Costs,  being  the  Single 
Premium  or  Payment  for  $1,000 
Protection  for  10  years. 

That  this  one  Payment  of  $55.- 
6736  is  sufficient  to  meet  the  In- 


Single  Premium,  age  35,  10  years  Insurance.  .$55.674 

Interest  for  1  year  at  4% 2.227 

Premium  and  Interest  end  of  1st  year $57.901 

Insurance  Cost  1st  year 6.149 

Single  Premium  Reserve  end  1st  year $51 .752 

Interest  for  2d  year  at  4% 2.070 

Premium  Reserve  and  Interest  end  2d  year.  .$53.822 

Insurance  Cost  for  the  2d  year 6 . 268 

Premium  Reserve  end  of  2d  year $47 .554 

Interest  for  the  3d  year  at  4% 1.902 

Premium  Reserve  and  Interest  end  3d  year.  .  .$49.456 

Insurance  Cost  for  the  3d  year 6 . 409 

Premium  Reserve  at  end  of  3d  year $43 .047 

Interest  for  the  4th  year  at  4% 1.722 

Premium  Reserve  and  Interest  end  4th  year.  .$44.769 

Insurance  Cost  for  4th  year 6.572 

Premium  Reserve  end  of  4th  year $38 . 197 

Interest  for  the  5th  year 1.528 

Premium  Reserve  and  Interest  end  of  5th  year .  $39 . 725 

Insurance  Cost  for  the  5th  year 6 . 745 

Premium  Reserve  end  of  5th  year .$32.980 

Interest  for  the  6th  year 1.319 

Premium  Reserve  and  Interest  end  6th  year.  .$34.299 

Insurance  Cost  for  the  6th  year 6.940 

Premium  Reserve  end  of  6th  year $27 .359 

Interest  for  the  7th  year 1.094 

Premium  Reserve  and  Interest  end  7th  year.  .$28.453 

Insurance  Cost  for  7th  year 7.157 

Premium  Reserve  end  of  7th  year $21 .296 


177 


surance  Costs  for  the  ten  years  is 
demonstrated  by  the  accompany- 
ing calculation. 


Interest  for  the  8th  year .$      852 

Premium  Reserve  and  Interest  end  8th  year.  .$22.148 

Insurance  Cost  for  the  8th  year 7.407 

Premium  Reserve  end  of  8th  year $14 .741 

Interest  for  the  9th  year .590 

Premium  Reserve  and  Interest  end  9th  year.  .$15.331 

Insurance  Cost  for  the  9th  year 7.678 

Premium  Reserve  end  of  9th  year $  7 .653 

Interest  for  the  10th  year .306 

Premium  Reserve  and  Interest  end  10th  year.  .$  7 .959 

Insurance  Cost  for  the  10th  year 7.960 

Termination  of  the  10  years'  Protection $  0.000 


The  foregoing  computation  and  demonstration  are  based  on  a  single  insurance  of 
$1,000,  which  is  entirely  theoretical  in  treatment  and  not  possible  of  practical  ex- 
emplification. However,  if  92,215  persons  are  taken  for  the  demonstration,  the  single 
premium  of  92,215  times  $55.6736  can  be  proved  adequate  for  the  payment  of  claims, 
the  latter  being  determined  by  the  death  ratios  shown  in  the  Mortality  Table  in  the 
column  of  "Probabilities  of  Dying."  This  entire  sum  would  be  improved  at  4  per 
cent  interest  for  the  first  year  and  $567,000  in  claims  deducted;  then  improve  the 
remainder  at  4  per  cent  for  one  year  and  deduct  $578,000;  improve  the  remainder  for 
the  third  year  and  deduct  $591,000;  and  thus  continuing  for  the  ten  years  it  will  be 
found  that  the  total  of  $6,389,000  of  claims  has  been  provided  for. 

The  "probabilities  of  living"  to  the  end  of  the  first,  second,  third  and  so  forth 
years,  are  readily  obtained  and  discounted  under  similar  treatment  to  that  shown 
for  the  "probabilities  of  dying"  in  the  first,  second,  third  and  so  forth  years,  and 
the  result  will  be  the  single  premiums  for  a  ten-year  Annuity  $8.2048,  and  being 
divided  into  the  Single  Premium  for  the  10-year  term  insurance  ($55.6736)  will 
produce  the  ten-year  term  Level  Annual  Contribution  Rate  of  $6.7855  to  provide  for 
the  promised  $1,000  death  benefit,  if  death  occur  within  the  ten  years. 

Level  annual  rates  for  whole  life  and  other  forms  of  contracts  could  likewise  be 
obtained. 


COMPUTATION  WITH  LAPSE  FACTOR  CONSIDERED. 

There  prevails  a  general  impression  that  considerable  reduction  in  the  rates  of 
contribution  can  be  made,  if  allowance  is  made  for  gains  from  excess  contribu- 
tions of  members  who  lapse  or  become  suspended.  In  order  to  show  what  re- 
duction may  be  anticipated,  I  have  taken  the  select  lapse  experience  of  a  very  large 
society,  for  entrants  at  age  35,  and  have  constructed  four  tables  similar  to  those 
already  given,  save  in  the  particular  of  using  the  lapse  rate  in  diminishing  the 
amount  of  protection  from  year  to  year.  That  is  to  say,  the  insurance  in  force  at 
the  beginning  of  the  year  is  not  only  decreased  by  the  amount  of  death  claims 
during  the  year,  but  also  by  the  amount  terminated  by  lapse. 

After  the  full  explanation  made  of  the  foregoing  tables,  it  is  unnecessary  to  enter 
into  any  detailed  discussion  of  the  following  exhibits,  3,  4,  5  and  6. 

I  have  assumed  such  an  amount  of  insurance  at  the  beginning  of  the  first  year 
as  to  produce  at  the  end  of  the  fifteenth  year  the  same  amount  of  insurance  as 
found  in  Exhibit  I  at  the  end  of  the  fifteenth  year.  In  Exhibit  I  the  original 
amount  of  protection  was  $92,215,000,  which  diminished  by  death  claims  during 


178 

fifteen  years  left  at  the  beginning  of  the  sixteenth  year  $81,702,000.  At  the  begin- 
ning of  the  first  year  in  column  2  of  Exhibit  3  the  amount  of  protection  is  $181,- 
452,000,  which  being  diminished  during  fifteen  years  by  deaths  and  lapses  is  reduced 
to  $81,702,000  at  the  beginning  of  the  sixteenth  year.  By  this  arrangement  there  is 
an  agreement  in  the  amounts  of  protection  at  the  beginning  of  the  sixteenth  year 
of  Exhibits  i  and  3.  Likewise,  after  the  fifteenth  year,  all  of  the  items  in  all  of 
the  columns  are  the  same. 

From  Exhibit  3  it  will  be  seen  that  during  the  first  15  years  $86,697,000  of  pro- 
tection are  terminated  by  lapse  or  suspension,  while  during  the  64  years  $94,755,000 
are  terminated  by  death.  Assuming  that  the  level  rate  of  contribution  for  entry  age 
is  in  excess  of  current  yearly  costs  of  protection,  then  it  is  evident  there  is  a  gain 
to  the  surviving  and  persistent  members  from  the  forfeitures  of  excess  contributions 
by  those  members  who  lapse.  That  this  gain  has  been  exaggerated  by  the  estimates 
of  those  who  favor  discounting  contributions  in  anticipation  of  gains  from  for- 
feitures can  be  demonstrated  from  a  comparison  of  the  two  sets  of  tables  re- 
spectively constructed  with  and  without  consideration  of  the  lapse  factor. 

Protection  assumed  with  lapse $181 ,452,000 

Protection  assumed  without  lapse 92,215,000 

Excess  protection  at  risk $  89 , 237 , 000 

Total  claims  with  lapse $  94 , 755 , 000 

Total  claims  without  lapse 92,215,000 

Excess  claims  with  lapse $     2,540,000 

Total  contributions  with  lapse $     3  , 547 , 005 

Total  contributions  without  lapse 3  , 167 ,619 

Total  excess  with  lapse $         379 , 386 

From  the  above  it  will  be  noted  that  with  $181,452,000  of  protection,  the  sum  of 
the  yearly  installments  of  contributions,  on  the  basis  of  $1.00  per  $1,000  of  protection, 
is  only  $379,386  in  excess  of  the  contributions  realized  on  the  same  basis  from  $92,- 
215,000  of  protection. 

Starting  out  with  almost  double  the  amount  of  protection  it  would  seem  that  a 
very  much  greater  excess  in  contributions  would  be  realized  than  shown  in  the 
above  comparison,  with  and  without  the  lapse  factor.  The  reason  for  the  small 
excess  in  contribution  is  that  the  great  bulk  of  the  lapses  is  in  the  early  years  of 
insurance.  In  the  sixth  column  of  Exhibit  3  it  will  be  noted  that  $22,921,000  is 
terminated  by  lapse  in  the  second  year  of  insurance.  In  the  first  year  of  insurance 
$9,544,000  is  terminated  by  lapse,  notwithstanding  the  fact  that  the  average  exposure 
in  the  first  year  is  only  from  three  to  six  months  for  those  who  lapse.  In  the  third 
year  of  insurance  $12,921,000  is  terminated  by  lapse. 

In  the  first  five  years  of  insurance  there  are  terminated  by  lapse  $72,682,000  of 
the  entire  $86,697,000  of  terminations. 

While  the  average  lapse  rate  for  the  entire  membership  of  a  society  may  be 
approximately  uniform  from  year  to  year,  when  there  is  no  unusual  disturbance  of 
this  average  uniformity  in  the  terminations  by  lapse,  yet  this  fact  does  not  give 
any  indication  of  the  gains  which  may  be  expected  from  forfeitures  by  such  termi- 
nations. The  experience  of  every  life  insurance  organization  shows  that  after  the 
tenth  or  fifteenth  year  lapses  cease  amongst  the  original  entrants ;  provided  there  have 


179. 

been  level  contributions  rates  from  ages  of  entry.  Under  the  assessment  plan  mem- 
bers at  advanced  ages,  after  20,  25,  and  30  years  of  membership,  lapse  in  large  num- 
bers, and  the  heavy  lapse  rate  materially  increases  the  death  rate.  This  fact  can 
be  noted  by  reference  to  the  experience  of  the  43  societies.  The  fact  that  there  is 
a  continuous  and  comparatively  regular  rate  of  lapse  amongst  the  new  entrants  tends 
to  mislead  those  persons  who  will  insist  upon  drawing  conclusions  from  averages. 

A  careful  study  of  the  following  four  tables  should  impress  upon  those  who 
have  favored  advance  reductions  in  rates  of  contributions  by  anticipation  of  gains 
from  forfeitures  the  fact  that  this  reduction  must  be  made  with  extreme  care  and 
conservatism. 

ANNUAL  PREMIUMS  REDUCED  BY  FORFEITURE. 

From  column  4  of  Exhibit  4  we  find  the  present  value  of  the  yearly  instalments 
of  claims,  or  "Single  Premium,"  for  $181,452,000  of  protection  to  be  $30,013,845,  while 
the  present  value  of  the  yearly  instalments  of  contributions  is  $2,018,413. 

Dividing  $30,013,845  by  $2,018,413,  we  obtain  the  annual  level  premium  per  $1,000 
of  whole  life  protection  to  be  $14.87,  as  against  $16.62  without  considering  the  lapse 
factor,  being  an  annual  difference  of  $175,  which  is  the  reduction  in  premium  per 
$1,000  on  account  of  gains  from  forfeitures. 

In  order  to  indicate  the  effect  of  the  gains  from  lapses,  the  following  comparisons 
are  submitted: 

15-YEAR   TERM. 

Without  lapse  factor * $7.46 

With  lapse  factor 7. 18 

20- YEAR   TERM. 

Without  lapse $  8 . 28 

With  lapse 7 . 87 

TERM   TO   AGE   70. 

Without  lapse $12 . 04 

With  lapse . . . .    1 1 !  03 

ORDINARY    WHOLE   LIFE. 

Without  lapse $16 . 62 

With  lapse 14 . 87 

20-PAY   LIFE. 

Without  lapse $22 . 70 

With  lapse 19.12 

PAYMENTS    LIMITED   TO   AGE   70. 

Without  lapse $17 .  Q2 

With  lapse 15^6! 

15-YEAR    ENDOWMENT. 

Without  lapse $51   92 

With  lapse ...........'.['.'.'.'.'.'.   40.43 

20-YEAR    ENDOWMENT. 

Without  lapse $3(5  73 

With  lapse 30  72 

ENDOWMENT   AT    AGE   70. 

Without  lapse $19.96 

With  lapse 17 . 53 


EXHIBIT  III. 


Years  of 
Insurance. 

Insurance  at  Begin- 
ning of  Years. 

Probability  of 
Dying. 

Yearly  Instalments 
of  Death  Claims. 

Lapse 
Rate. 

Yearly  Terminations 
By  Lapse. 

(1) 
1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 

(2) 
$181,452,000 
170,792,000 
146,794,000 
132,920,000 
122,429,000 
113,887,000 
107,151,000 
101,640,000 
97,010,000 
92,844,000 
89,651,000 
87,213,000 
85,205,000 
83,843,000 
82,696,000 
81,702,000 

(3) 
.0061487 
.0063067 
.0064395 
.0066977 
.0069209 
.0071708 
.0074483 
.0077657 
.0081129 
.0084797 
.0088668 
.0092870 
.0097538 
.0102693 
.0108238 
.0114440 

(4) 
$    1,116,000 
1,077,000 
953,000 
890,000 
847,000 
816,000 
798,000 
790,000 
787,000 
787,000 
795,000 
810,000 
831,000 
861,000 
895,000 
935,000 

(5) 
.05260 
.13420 
.08802 
.07223 
.06285 
.05198 
.04398 
.03778 
.03484 
.02591 
.01832 
.01313 
.00624 
.00341 
.00120 

(6) 
$     9,544,000 
22,921,000 
12,921,000 
9,601,000 
7,695,000 
5,920,000 
4,713,000 
3,840,000 
3,379,000 
2,406,000 
1,643,000 
1,198,000 
531,000 
286,000 
99,000 

17 

80,767,000 

0121460 

981,000 

18 

79,786,000 

.0128970 

,029,000 

19 

78,757,000 

.0137512 

,083,000 

20 

77  674  000 

0146767 

140  000 

21 

76  534  000 

0157054 

202  000 

22 

75  332  000 

0168587 

270  000 

23 

74  062  000 

0181200 

342  000 

24 

72  720  000 

0194994 

418  000 

25 

71  302  000 

0210513 

501  000 

26 

69  801  000 

0227504 

1  588,000 

27 

68  213  000 

0246434 

1,681,000 

28 

66  532  000 

0267240 

1,778,000 

29 

64  754  000 

0290330 

1,880,000 

30 

62,874,000 

0315711 

1,985,000 

31 

60  889  000 

0343904 

2  094  000 

32 

58  795  000 

0375202 

2  206  000 

33 

56  589  000 

0409620 

2  318  000 

34 

54  271  000 

0447753 

2  430  000 

35 

51  841  000 

0489767 

2  539  000 

36 

49  302  000 

0536489 

2  645  000 

37 

46  657  000 

0588122 

2  744  000 

38 

43  913  000 

0644912 

2  832,000 

39 

41  081  000 

0708113 

2  909  000 

40 
41 

38,172,000 
35  203  000 

.0777795 
0854757 

2,969,000 
3,009,000 

42 

32  194  000 

0939927 

3  026  000 

43 

29  168  000 

1034010 

3  016  000 

44 

26  152  000 

1138345 

2  977  000 

45 

23  175  000 

1253506 

2  905  000 

46 

20  270  000 

1380858 

2  799  000 

47 

17  471  000 

1521951 

2  659  000 

48 

14  812  000 

1677694 

2  485  000 

49 

12  327  000 

1849599 

2,280,000 

50 

10  047  000 

2040410 

2,050,000 

51 

7  997  000 

2250844 

1,800,000 

52 

6  197  000 

2483460 

1  539  000 

53 

4  658  000 

2741520 

1  277  000 

54 

3  381  000 

3025732 

1  023  000 

55 

2  358  000 

3341815 

788  000 

56 

1  570  000 

3687898 

579,000 

57 

991  000 

4076690 

404  000 

58 

587  000 

4497445 

264  000 

59 

323  000 

4984520 

161  000 

60 

162  000 

5493827 

89  000 

61 

73  000 

6027397 

44  000 

62 

29  000 

6551724 

19,000 

63 

10  000 

7000000 

7  000 

64 

3  000 

1  0000000 

3  000 

$  94,755,000 

$  86,697,000 

EXHIBIT  IV. 


Years  of 
Insurance. 

Yearly  Instalments 
of  Claims. 

Present  Value  of  SI.  00 
Due  n  Years  Hence. 

Present  Value  of  Instalments  of  Death 
Claims 

(1) 

(2) 

(3) 

(4) 

1 

$  1,116,000 

.961538 

$  1,073,100.00 

2 

1,077,000 

.924556 

995,750.00 

3 

953,000 

.888996 

847,210.00 

4 

890,000 

.854804 

760,780.00 

5 

847,000 

.821927 

696,160.00 

6 

816,000 

.790315 

644,900.00 

7 

798,000 

.759918 

606,420.00 

8 

790,000 

.730690 

577,240.00 

9 

787,000 

.702587 

552,930.00 

10 

787,000 

.675564 

531,670.00 

11 

795,000 

.649581 

516,420.00 

12 

810,000 

.624597 

505,930.00 

13 

831,000 

.600574 

499,080.00 

14 

861,000 

.577475 

497,200.00 

15 

895,000 

.555265 

496,960.00—$  9,801,750.00 

16 

935,000 

.533908 

499,210.00 

17 

981,000 

.513373 

503,620.00 

18 

1,029,000 

.493628 

507,950.00 

19 

1,083,000 

.474642 

514,040.00 

20 

1,140,000 

.456387 

520,270.00—  12,346,840.00 

21 

1,202,000 

.438834 

527,470.00 

22 

1,270,000 

.421955 

535,880.00 

23 

1,342,000 

.405726 

544,480.00 

24 

1,418,000 

.390121 

553,200.00 

25 

1,501,000 

.375117 

563,050.00 

26 

1,588,000 

.360689 

572,770.00 

27 

1,681,000 

.346817 

583,000.00 

28 

1,778,000 

.333477 

592,910.00 

29 

1,880,000 

.320651 

602,820.00 

30 

1,985,000 

.308319 

612,010.00 

31 

2,094,000 

.296460 

620,800.00 

32 

2,206,000 

.285058 

628,850.00 

33 

2,318,000 

.274094 

635,350.00 

34 

2,430,000 

.263552 

640,440.00 

35 

2,539,000 

.253415 

643,410.00—  21,203,280.00 

36 

2,645,000 

.243669 

644,510.00 

37 

2,744,000 

.234297 

642,910.00 

38 

2,832,000 

.225285 

638,000.00 

39 

2,909,000 

.216621 

630,140.00 

40 

2,969,000 

.208289 

618,420.00 

41 

3,009,000 

.200278 

602,630.00 

42 

3,026,000 

.192575 

582,730.00 

43 

3,016,000 

.185168 

558,470.00 

44 

2,977,000 

.  178046 

530,040.00 

45 

2,905,000 

.171198 

497,340.00 

46 

2,799,000 

.164614 

460,750.00 

47 

2,659,000 

.  158283 

420,970.00 

48 

2,485,000 

.152195 

378,210.00 

49 

2,280,000 

.  146341 

333,660.00 

50 

2,050,000 

.140713 

288,460.00 

51 

1,800,000 

.135301 

243,540.00 

52 

1,539,000 

.  130097 

200,220.00 

53 

1,277,000 

.125093 

159,740.00 

54 

1,023,000 

.  120282 

123,050.00 

55 

788,000 

.115656 

91,138.00 

56 

579,000 

.111207 

64,389.00 

57 

404,000 

.106930 

43,200.00 

58 

264,000 

.102817 

27,144.00 

59 

101  ,000 

.098863 

15,917.00 

60 

89,000 

.095060 

8,460.40 

61 

44,000 

.091404 

4,021.80 

62 

19,000 

.087889 

1,669.90 

63 

7,000 

.084508 

591.56 

64 

3,000 

.081258 

243.78 

$94,755,000 

$30,013,845.44 

EXHIBIT  V. 


Ins;:rance 
Protection. 

Probability  of 
Living  Less 
Probability 
of  Lapse. 

Years  of 
Insurance. 

Insurance  at  Beginning 
of  Years  Subject  to 
Contributions. 

Assumed  Annual 
Premium  Paid 
in  Advance. 

Yearly  Instal- 
ments of 
Contributions. 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

$181,452,000 

.9412513 

1 

$181,452,000 

$1.00 

$181,452 

181,452,000 

.8594933 

2 

170,792,000 

1.00 

170,792 

170,792,000 

.9054905 

3 

146,794,000 

1.00 

146,794 

146,794,000 

.9210723 

4 

132,920,000 

1.00 

132,920 

132,920,000 

.9302291 

5 

122,429,000 

.00 

122,429 

122,429,000 

.9408492 

6 

113,887,000 

.00 

113,887 

113,887,000 

.9485717 

7 

107,151,000 

.00    . 

107,151 

107,151,000 

.9544543 

8 

101,640,000 

.00 

101,640 

101,640,000 

.9570471 

9 

97,010,000 

.00 

97,010 

97,010,000 

.9656103 

10 

92,844,000 

.00 

92,844 

92,844,000 

.9728132 

11 

89,651,000 

.00 

89,651 

89,651,000 

.9769830 

12 

87,213,000 

.00 

87,213 

87,213,000 

.9840062 

13 

85,205,000 

.00 

85,205 

85,205,000 

.9863207 

14 

83,843,000 

.00 

83,843 

83,843,000 

.9879762 

15 

82,696,000 

.00 

82,696 

82,696,000 

.9891762 

16 

81,702,000 

1.00 

81,702 

81,702,000 

.9885560 

17 

80,767,000 

1.00 

80,767 

80,767,000 

.9878540 

18 

79,786,000 

1.00 

79,786 

79,786,000 

.9871030 

19 

78,757,000 

1.00 

78,757 

78,757,000 

.9862488 

20 

77,674,000 

1.00 

77,674 

77,674,000 

.9853233 

21 

76,534,000 

.00 

76,534 

76,534,000 

.9842946 

22 

75,332,000 

.00 

75,332 

75,332,000 

.9831413 

23 

74,062,000 

.00 

74,062 

74,062,000 

.9818800 

24 

72,720,000 

.00 

72,720 

72,720,000 

.9805006 

25 

71,302,000 

.00 

71,302 

71,302,000 

.9789487 

26 

69,801,000 

.00 

69,801 

69,801,000 

.9772496 

27 

68,213,000 

.00 

68,213 

68,213,000 

.9753566 

28 

66,532,000 

.00 

66,532 

66,532,000 

.9732760 

29 

64,754,000 

.00 

64,754 

64,754,000 

.9709670 

30 

62,874,000 

.-00 

62,874 

62,874,000 

.9684289 

31 

60,889,000 

.00 

60,889 

60,889,000 

.9656096 

32 

58,795,000 

.00 

58,795 

58,795,000 

.9624798 

33 

56,589,000 

.00 

56,589 

56,589,000 

.9590380 

34 

54,271,000 

.00 

54,271 

54,271,000 

.9552247 

35 

51,841,000 

.00 

51,841 

51,841,000 

.9510233 

36 

49,302,000 

.00 

49,302 

49,302,000 

.9463511 

37 

46,657,000 

.00 

46,657 

46,657,000 

.9411878 

38 

43,913,000 

.00 

43,913 

43,913,000 

.9355088 

39 

41,081,000 

.00 

41,081 

41,081,000 

.9291887 

40 

38,172,000 

1.00 

38,172 

38,172,000 

.9222205 

41 

35,203,000 

1.00 

35,203 

35,203,000 

.9145243 

42 

32,194,000 

1.00 

32,194 

32,194,000 

.9060073 

43 

29,168,000 

1.00 

29,168 

29,168,000 

.8965990 

44 

26,152,000 

1.00 

26,152 

26,152,000 

.8861655 

45 

23,175,000 

1.00 

23,175 

23,175,000 

.8746494 

46 

20,270,000 

1.00 

20,270 

20,270,000 

.8619142 

47 

17,471,000 

1.00 

17,471 

17,471,000 

.8478049 

48 

14,812,000 

1.00 

14,812 

14,812,000 

.8322306 

49 

12,327,000 

1.00 

12,327 

12,327,000 

.8150401 

50 

10,047,000 

1.00 

10,047 

10,047,000 

.7959590 

51 

7,997,000 

1.00 

7,997 

7,997,000 

.7749156 

52 

6,197,000 

1.00 

6,197 

6,197,000 

.7516540 

53 

4,658,000 

1.00 

4,658 

4,658,000 

.7258480 

54 

3,381,000 

1.00 

3,381 

3,381,000 

.(><  174268 

55 

2,358,000 

1.00 

2,358 

2,358,000 

.6658185 

56 

1,570,000 

1.00 

1,570 

1,570,000 

.6312102 

57 

991,000 

1  .00 

991 

991,000 

.5923310 

58 

587,000 

1  .  00 

587 

587,000 

.5502555 

59 

323,000 

1.00 

323 

323,000 

.5015480 

60 

162,000 

1.00 

162 

162,000 

.4506173 

61 

73,000 

1.00 

73 

73,000 

.3972603 

62 

29,000 

1.00 

29 

29,000 

.3448276 

63 

10,000 

1.00 

10 

10,000 

.3000000 

64 

3,000 

1.00 

3 

3,000 

.0000000 

65 

0,000 

— 

Total  of  yearly  instalments  of  contributions  receivable $3,547,005 


EXHIBIT  VI, 


Years  of 
Insurance. 

Amount  of  Annual 
Contributions. 

Present  Value  of  $1.00 
Due  n  Years  Hence. 

Present  Value  of  Yearly  Instalments  of 
Contributions. 

(1) 

(2) 

(3) 

(4) 

1 

$181,452 

1.000000 

$       181,452.00 

2 

170,792 

.961538 

164,223.00 

3 

146,794 

.924556 

135,719.00 

4 

132,920 

.888996 

118,166.00 

5 

122,429 

.854804 

104,635.00 

6 

113,887 

.821927 

93,606.80 

7 

107,151 

.790315 

84,682.70 

8 

101.640 

.759918 

77,237.90 

9 

97,010 

.730690 

70,884.30 

10 

92,844 

.702587 

65,230.70 

11 

89,651 

.675564 

60,564.80 

12 

87,213 

.649581 

56,651.90 

13 

85,205 

.624597 

53,219.10 

14 

83,843 

.600574 

50,354.00 

15 

82,696 

.577475 

47,755.00—$  1,364,382 

.20 

16 

81,702 

.555265 

45,367.30 

17 

80,767 

.533908 

43,123.20 

18 

79,786 

.513373 

40,960.90 

19 

78,757 

.493628 

38,877.70 

20 

77,674 

.474642 

36,868.40—     1,569,579 

.70 

21 

76,534 

.456387 

34,930.10 

22 

75,332 

.438834 

33,059.30 

23 

74,062 

.421955 

31,251.90 

24 

72,720 

.405726 

29,505.40 

25 

71,302 

.390121 

27,817.40 

26 

69,801 

.375117 

26,184.40 

27 

68,213 

.360689 

24,604.50 

28 

66,532 

.346817 

23,075.20 

29 

64,754 

.333477 

21,594.80 

30 

62,874 

.320651 

20,161.40 

31 

60,889 

.308319 

18,773.90 

32 

58,795 

.296460 

17,431.00 

33 

56,589 

.285058 

16,131.80 

34 

54,271 

.274094 

14,875.90 

35 

51,841 

.263552 

13,663.30—     1,922,640 

.00 

36 

49,302 

.253415 

12,494.10 

37 

46,657 

.243669 

11,369.30 

38 

43,913 

.234297 

10,289.10 

39 

41,081 

.225285 

9,255.40 

40 

38,172 

.216621 

8,269.20 

41 

35,203 

.208289 

7,332.70 

42 

32,194 

.200278 

6,448.00 

43 

29,168 

.192575 

5,617.30 

44 

26,152 

.185168 

4,842.80 

45 

23,175 

.178046 

4,126.40 

46 

20,270 

.171198 

3,470.40 

47 

17,471 

.164614 

2,876.10 

48 

14,812 

.  158283 

2,344.60 

49 

12,327 

.152195 

1,876.20 

50 

10,047 

.  146341 

1,470.40 

51 

7,997 

.140713 

1,125.30 

52 

6,197 

.135301 

838.50 

53 

4,658 

.  130097 

606.00 

54 

3,381 

.125093 

423.00 

55 

2,358 

.  120282 

283.60 

56 

1,570 

.115656 

181.60 

57 

991 

.111207 

110.20 

58 

587 

.  106930 

62.80 

59 

323 

.102817 

33.20 

60 

162 

.098863 

16.00 

61 

73 

.095060 

6.90 

62 

29 

.091404 

2.70 

63 

10 

.087889 

.88 

64 

3 

.084508 

.26 

S3,  047,005 

$2,018,412.94 

184 

FEASIBILITY  OF  EMPLOYING  THE  LAPSE  FACTOR. 

It  is  very  reasonably  contended  that  the  immediate  need  of  those  who  generally 
seek  protection  in  fraternal  orders  is  to  bring  within  their  means  the  contributions 
for  sufficiently  large  benefits  to  support  their  families.  To  do  this,  it  is  argued  that 
every  advantage  must  be  taken  by  which  the  rate  of  contribution  can  be  reduced. 

For  illustration,  it  may  be  stated  that  the  net  annual  level  premium  at  age  35 
for  $1,000  of  protection  according  to  the  National  Fraternal  Congress  Table  of 
Mortality,  is  $29.11,  where  the  rate  of  mortality  alone  is  considered.  However,  if  it 
is  assumed  that  three  .per  cent  interest  can  be  earned  on  the  excess  contributions 
over  current  insurance  cost,  then  the  premium  can  be  reduced  to  $18.91.  If  three 
and  one-half  per  cent  interest  be  assumed,  the  rate  of  contribution  need  be  only 
$17.71,  and  with  a  four  per  cent  interest  assumption,  the  rate  would  be  $16.62.  The 
higher  the  rate  of  interest,  the  greater  the  reduction  in  premium. 

No  one  will  deny  the  feasibility,  practicability,  or  desirability  of  allowing  for 
some  interest  earning  in  the  computation  of  rates  of  contribution.  The  earnings  from 
interest  go  to  increase  the  accumulation,  and  avoid  the  need  for  the  members  to 
contribute  so  largely  toward  the  principal  of  the  required  accumulation  to  maintain  a 
level  pemium.  The  receipts  from  interest  come  from  other  sources  than  from  the 
contributions  of  members  for  whose  benefit  these  receipts  are  used. 

On  the  assumption  of  three  per  cent  interest  earnings,  there  has  been  no  hesitancy 
about  applying  that  earning  to  an  advance  reduction  of  the  rate  of  contribution 
from  $29.11  to  $18.91.  If  it  can  be  assumed  that  a  sufficient  amount  can  be  de- 
pended upon  from  forfeitures  of  withdrawing  members  to  equal  ten  per  cent  of 
the  contribution  of  persistent  members,  then  why  should  not  this  amount  be  anticipated 
in  the  computation  of  premiums,  and  ten  per  cent  at  once  deducted  from  the  $18.91 
rate,  the  $17.71,  or  $16.62  rates? 

It  has  been  shown  that  mathematical  computations  can  be  made  to  include  the 
lapse  factor,  on  the  same  principle  as  when  including  the  mortality  and  interest 
factors,  when  a  lapse  rate  is  given.  And  by  assuming  the  lapse  rate  of  a  large 
society  for  entry  age  35  the  contribution  rates  have  been  computed  and  given  in 
comparison  with  contributions  where  lapse  is  not  considered.  The  percentages  of 
decrease  are  as  follows : 

On  15-year  term 4% 

On  2O-year  term 5% 

On  term  to  age  70 9% 

On  whole  life 10% 

On  limited  pay  to  age  70 13% 

On  endowment  to  age  70  13% 

On  2O-limited  pay    15% 

On  2O-year  endowment 17% 

On  15-year  endowment   20% 

The  above  reductions  in  contribution  rates,  for  the  several  forms  of  certificates, 
were  obtained  upon  the  assumption  of  the  same  lapse  rate  under  each  form.  This 
is  not  true.  The  lapse  is  very  much  larger  on  term  than  whole  life  certificates.  Is 
larger  on  whole  life  without  than  with  profit.  Is  larger  on  any  whole  life  form 
than  on  endowment  certificates.  Hence  if  the  lapse  factor  were  employed,  different 
rates  would  be  necessary  for  different  forms  of  contracts ;  otherwise  the  percentage 
reduction  is  exaggerated. 

Admitting,  however,  that  the  introduction  of  the  lapse  factor  would  reduce  the 


185 


contribution  rate  in  anticipation  of  gains  from  forfeitures  by  lapse,  then  why  not 
employ  it  in  the  computation  of  rates,  even  though  necessitating  different  assumptions 
for  different  societies  and  for  different  forms  of  contracts  in  the  same  society. 

A  writer  in  a  recent  report  on  the  experience  of  a  prominent  fraternal  beneficiary 
society  has  strongly  advocated  the  use  of  the  lapse  factor  in  premium  calculations, 
and  vigorously  combats  the  general  objections  almost  universally  urged  by  actuaries 
against  its  employment. 

It  is  well  known  that  I  take  a  different  view  of  the  lapse  factor,  and  it  is  the 
present  purpose  to  give  the  facts  upon  which  I  have  based  my  conclusions.  I  have 
no  partiality  nor  prejudice  in  the  matter,  and  have  no  pet  theory  to  sustain.  The 
facts  in  the  case  have  formed  for  me  my  opinion. 

In  the  outset  the  acknowledgment  is  frankly  made  that  no  one  can  possibly  foretell 
the  actual  mortality  experience  of  any  society.  A  fair  estimate  is  the  best  that 
can  be  expected  in  advance.  Notwithstanding  such  admission,  I  have  not  hesitated 
to  advise  the  acceptance  of  some  mortality  experience  as  a  basis  for  calculating  rates 
of  contribution  which  are  to  provide  for  definitely  promised  benefits. 

It  is  freely  admitted  that  no  one  can  foretell  the  interest  rate  that  can  be  earned 
on  money  during  the  next  20,  30,  40  or  50  years,  nor  can  any  one  certainly  predict 
that  the  funds  will  always  be  safely  invested,  and  yet  I  have  unhesitatingly  recom- 
mended rates  of  contribution  based  upon  a  definitely  assumed  rate  of  interest,  and 
upon  the  presumption  that  the  funds  could  be  securely  invested  and  honestly  handled. 

In  view  of  such  acknowledgment  and  admission,  why  should  I  hesitate  to  assume 
some  definite  lapse  rate,  based  upon  some  well  authenticated  experience,  and  in- 
troduce that  into  the  calculation  of  premiums,  as  well  as  to  use  the  other  two  un- 
certain factors  of  mortality  and  interest  rates,  to  say  nothing  of  the  equally  uncertain 
condition  of  safe  investment. 

The  reason  for  recommending  rates  of  contribution  based  upon  assumed  rates  of 
mortality  and  interest,  is  because  of  the  close,  and  usually  accurate,  estimate  that 
can  be  made  of  future  mortality  experience  and  interest  earning,  and  of  the  com- 
paratively simple  mathematical  calculations  involved  in  the  use  of  these  two  factors. 

The  reason  for  questioning  the  advisability  of  the  use  of  the  lapse  factor  is 
because  of  (a)  its  uncertainty;  (b)  its  variable  and  disappointing  character;  (c)  its 
subject  to  control  by  the  human  volition;  (d)  its  effect  upon  expenses;  (e)  its  effect 
upon  the  reserve  accumulation;  (f)  the  complications  incident  to  making  an  estimate 
of  a  future  lapse  rate  from  any  past  experience. 

To  indicate  how  uncertain  it  would  be  as  a  factor  in  computations,  I  submit 
the  following  rates  of  lapse  per  1,000  members,  at  the  given  ages,  for  the  societies 
mentioned : 

If  the  lapse  rate  of  the  Ancient  Order  of  United  Workmen  were  assumed  for  the 


Ages. 

A.  0.  of  F. 

M.  W.  of  A. 

R.  N.  A. 

R.A. 

A.  0.  U.  W. 

20  

95.0 

165.7 

86.4 

38.7 

116.9 

25 

65  8 

126  6 

62  4 

33  4 

158  7 

30. 

44.8 

81  6 

42.7 

27.8 

103.1 

35  
40 

30.1 
17  9 

56.7 
43  1 

25.0 
25  2 

24.0 
20  2 

79.6 
59  5 

45     . 

10  4 

32  9 

21  4 

16  2 

43  8 

50  
55  

6.1 
3.6 

15.3 
5.7 

15.4 
7.6 

12.7 
9.3 

27.7 
12.6 

60 

2  6 

2  7 

6  2 

8  5 

186 


Royal  Arcanum,  the  resulting  contributions  would  be  insufficient,  measured  by  the 
Royal  Arcanum  lapse  rate.  If  the  Royal  Arcanum's  past  experience  were  assumed 
for  that  and  other  societies,  the  reduction  in  rates  of  contribution  would  be  so  in- 
significant as  not  to  be  worth  consideration. 

How  would  it  be  possible  to  construct  any  uniform  schedule  of  rates  that  would 
conform  to  these  varying  rates  of  secession? 

If  there  were  an  exhibit  of  a  larger  number  of  societies,  the  variance  would  be 
more  striking,  and  the  demonstration  more  complete  of  the  impossibility  of  har- 
monizing the  differences  into  a  uniform  rate  of  lapse  suitable  for  the  different  or- 
ganizations. 

An  analysis  of  the  experience  of  each  society  would  disclose  a  different  rate  of 
lapse  in  different  localities  and  in  different  occupations.  The  difference  due  to  different 
localities  is  well  established  by  the  following  showing  of  lapse  rates  in  several  juris- 
dictions of  the  Ancient  Order  of  United  Workmen : 

A.  O.  U.  W.  LAPSE  RATE  IN  DIFFERENT  JURISDICTIONS. 


Ages. 

N.Y. 

Cal. 

Mo. 

Mass. 

Pa. 

Ga. 

21            

152.8 

100.0 

266.9 

9  7 

102  8 

219  2 

25               

147.1 

125.8 

201.0 

36  2 

188  8 

388  8 

30           

108.1 

86.6 

128.1 

22.3 

115  7 

238  1 

35           

80.8 

71.7 

97.0 

16.9 

84  2 

187  4 

40           

60.3 

50.3 

78.1 

12.0 

61  3 

162  5 

45       

43.5 

35.6 

53.8 

9.0 

46.4 

115  3 

50       

23.4 

24.8 

29.7 

6.2 

32.4 

77.8 

55     

9.0 

13.5 

11.0 

4.2 

18.7 

16.7 

60  

5.7 

9.5 

8.8 

2.9 

13.3 

The  aggregate  lapse  rate  for  the  thirteen  jurisdictions,  as  given  in  the  first  table, 
would  not  fit  any  one  of  the  above  separate  jurisdictions.  It  would  simply  be  ruinous 
for  Massachusetts,  since  the  amount  to  be  realized  from  forfeitures  would  not  equal 
one-fourth  of  the  assumed  gains.  The  application  of  such  a  rate  would  bring  the 
ridiculous  result  of  throwing  one  of  the  best  managed  jurisdictions  into  the  deficiency 
class. 

The  following  from  the  recent  experience  of  the  Manchester  Unity  will  emphasize 
the  effect  of  locality  and  occupation,  as  grouped  by  its  actuary : 

MANCHESTER  UNITY  LAPSE  EXPERIENCE  PER  1,000  MEMBERS. 


Non-Manufacturing. 

Textile. 

Manu 
tile 
A 

Facturing  (ex-Tex- 
)  ,  Mining  and 
letropolitan. 

Rural 
Lodges. 

Urban 
Lodges 

All 
Lodges. 

Rural 
Lodges. 

Urban 
Lodges: 

All 
Lodges. 

Rural 
Lodges. 

Urban 
Lodges. 

All 
Lodges. 

20               

48. 
38. 
25. 
17. 
12. 
9. 
5. 
5. 
2. 
3. 

74. 
64. 
39. 
27. 
16. 
9. 
4. 
6. 
1. 
0. 

53. 
43. 
28. 
19. 
13. 
9. 
5. 
5. 
2. 
2. 

28. 
28. 
22. 
14. 
12. 
8. 
3. 
2. 
2. 
2. 

68. 

63. 
48. 
33. 
19. 

12. 
9. 

8. 
7. 
2. 

57. 
53. 
40. 

27. 
17. 
11. 
7. 
6. 
5. 
2. 

49. 
38. 
27. 
25. 
12. 
8. 
7. 
5. 
2 

o! 

85. 
76. 
55. 
37. 
20. 
10. 
9. 
3. 
3. 
3. 

71. 
63. 
46. 
33. 
17. 
9. 
8. 
4. 
3. 
2. 

25           

30 

35                                      .    . 

40 

45                   

50               

55           

60 

65                                      .    . 

187 

The  foregoing  statistics  are  from  "aggregate"  tables,  and  show  the  lapse  rate  at 
each  age  for  all  members  at  that  age,  without  reference  to  their  ages  at  entry  or 
duration  of  membership.  These  statistics  clearly  demonstrate  that  the  larger  per  cent 
of  all  lapses  is  at  the  low  ages,  and  clearly  prove  that  the  material  reduction  in  rates 
of  contribution  on  account  of  lapses  could  only  be  made  at  the  low  ages,  assuming 
that  such  statistics  could  be  accepted  as  conclusive. 

However,  the  above  statistics  from  "aggregate''  tables  do  not  disclose  nor  discover 
all  of  the  objections  which  can  be  urged  against  the  use  of  lapse  rate.  When  we 
investigate  lapse  experiences,  as  given  in  "select"  tables,  we  find  that  the  larger  per- 
centage of  lapses  not  only  occur  at  the  young  ages,  but  likewise  in  the  early  years 
of  membership. 

Of  a  given  number  who  enter  at  age  20,  many  will  lapse  in  the  second  year, 
until  lapse  virtually  ceases  after  twelve  or  fifteen  years  of  membership.  Therefore, 
the  members  who  entered  at  age  20  and  attained  to  age  35  would  become  persistent, 
and  the  lapse  rate  among  them  would  not  compare  with  the  lapse  rate  among  members 
in  their  first  year  of  entry  at  age  35. 

To  instance :  The  lapse  rate  of  members,  who  entered  at  age  20,  in  the  fifteenth 
year  of  membership,  at  age  35,  by  the  Modern  Woodmen  experience,  was  eight  in 
the  1,000.  The  lapse  rate  of  members  who  entered  at  age  35,  in  the  first  year  of 
membership,  was  93  in  the  1,000.  The  "aggregate"  lapse  rate  for  all  members  at 
age  35  is  shown  to  be  57  in  the  1,000. 

Assuredly  no  one  will  contend  that  accurate  results  can  be  obtained  from  grouping 
together  persons  of  the  same  attained  age  with  such  a  wide  difference  in  rate  of 
lapse.  This,  however,  is  done  when  "aggregate"  tables  are  used.  To  use  "select" 
tables  would  be  impracticable,  because  of  the  complications  introduced  into  the 
calculation  of  rates  of  contribution. 

Some  one  may  say  that  "select"  tables  also  show  different  death  rates  for  the 
fifteenth  year  of  members  who  entered  at  35.  That  is  true.  The  Woodmen  ex- 
perience shows  a  death  rate  for  members  who  entered  at  20,  in  their  fifteenth  year 
of  membership,  at  attained  age  35,  of  eight  in  the  1,000;  while  for  members  who 
entered  at  35,  in  the  first  year  of  membership,  it  shows  three  in  the  1,000.  The 
"aggregate"  death  rate  for  all  members  at  age  35  is  six  in  the  1,000. 

It  is  also  true  that  when  the  "aggregate"  lapse  rate  is  lower  than  the  "select"  rate 
for  any  age,  say  at  35,  it  would  give  a  schedule  of  assessment  rates,  deduced  therefrom, 
on  the  side  of  safety. 

While  that  is  true,  it  must  be  remembered  that  the  rate  of  lapse  rapidly  falls  off 
after  the  second  year  of  membership,  the  effect  of  which  is  only  partially  disclosed 
in  the  "aggregate"  table,  and  there  must  result  an  error  in  calculations  which  will 
be  cumulative  in  character  and  ultimately  end  in  trouble.  The  Modern  Woodmen  ex- 
perience is  conveniently  at  hand,  and  since  it  is  similar  to  all  other  experiences  which 
have  come  under  my  observation,  I  give  the  lapse  rate  and  death  rate  of  that  Society 
by  membership  years,  from  one  to  fifteen,  for  the  following  sample  entry  ages  (mem- 
bers not  admitted  above  age  45)  : 

As  before  intimated,  it  might  be  argued  that  wrong  results  would  as  likely  proceed 
from  the  use  of  "aggregate"  mortality  tables  as  from  the  "aggregate"  method  in 
determining  lapse  rate,  for  it  is  seen  that  the  death  rate  persistently  tends  to  in- 
crease with  the  years  of  membership  in  somewhat  the  same  ratio  to  the  decrease 
in  the  lapse  rate  with  duration  of  membership. 

However,  it  has  been  found  perfectly  feasible  and  absolutely  safe  to  allow  for  this 
increase  in  death  rate,  and  to  avoid  the  effect  of  the  medical  selection  during  the 


188 


OF  A.  LAPSE  AND  MORTALITY  EXPERIENCE  PER  1,000. 


Years 

20. 

25. 

30. 

35. 

40. 

45. 

of  Ins. 

Lapse 
Rate. 

Death 
Rate. 

Lapse 
Rate. 

Death 
Rate. 

Lapse 
Rate. 

Death 
Rate. 

Lapse 
Rate. 

Death 
Rate. 

Lapse 
Rate. 

Death 
Rate. 

Lapse 
Rate. 

Death 
Rate. 

1 

184. 

3.25 

157. 

3.06 

126. 

2.61 

93. 

3.02 

85. 

3.39 

66. 

2.91 

2 

180. 

4.23 

144. 

3.01 

109. 

3.39 

85. 

2.92 

68. 

3.71 

63. 

5.27 

3 

129. 

4.24 

101. 

3.44 

72. 

4.00 

57. 

4.69 

48. 

3.84 

32. 

6.39 

4 

97. 

3.82 

72. 

3.74 

51. 

3  .  13 

39. 

5.27 

34. 

2.28 

24. 

6.53 

5 

68. 

5.79 

52. 

3.51 

39. 

4.83 

26. 

4.56 

23. 

6.23 

17. 

7.09 

6 

55. 

6.09 

39. 

4.59 

30. 

2.81 

24. 

4.94 

16. 

5.00 

11. 

8.44 

7 

40. 

6.43 

31. 

5.49 

24. 

4.82 

18. 

4.66 

13. 

6.92 

13. 

8.20 

8 

42. 

5.52 

21. 

4.53 

17. 

5.82 

17. 

5.34 

12. 

8.12 

8. 

8.85 

9 

32. 

4.04 

17. 

4.27 

19. 

5.38 

12. 

5.43 

9. 

7.36 

6. 

9.04 

10 

21. 

1.47 

12. 

4.63 

14. 

6.27 

10. 

5.75 

7  . 

9.71 

8. 

15.82 

11 

26. 

3.98 

9. 

3.59 

9. 

4.17 

14. 

6.25 

6. 

10.85 

6. 

7.83 

12 

12. 

5.95 

7. 

2.45 

10. 

2.55 

7. 

8.56 

5. 

8.99 

5. 

20.98 

13 

4. 

3.58 

13. 

7.34 

5. 

8.43 

4. 

4.84 

4. 

6.67 

10.96 

14 

14. 

4.65 

3. 

4.09 

8. 

4.35 

9. 

6.20 

5. 

11.58 

5.' 

15.58 

15 

8. 

8.06 

2. 

8.21 

5. 

9.38 

12. 

11.73 

3. 

14.64 

2. 

15.70 

NOTE. — 'The  above  disproves  the  oft  repeated  statement  that  more  deaths  occur  in  the  earlier  than  later  years 
of  insurance.    General  experiences  of  other  societies  are  similar  to  that  of  the  Woodmen. 

first  few  years  of  membership  by  excluding  the  experience  of  the  first  five  years, 
when  the  effect  is  most  pronounced.  After  this  is  done,  the  subsequent  "adjustment" 
further  relieves  the  mortality  table  from  the  objections  mentioned.  Further  than  this, 
the  conservative  management  and  cautious  actuary  will  then  adopt  some  standard 
mortality  table  as  a  basis  for  rates,  which  is  even  higher  than  this  adjusted  table 
representing  the  experience  of  the  society  in  question. 

It  may  be  said  that  the  same  conservative  and  cautious  course  could  be  adopted 
in  respect  of  the  lapse  rate.  Assuredly  it  could;  but  the  result  would  be  to  make 
the  reduction  in  rates  of  contribution  so  triflingly  small  that  no  one  would  go  to 
the  trouble  and  expense  of  introducing  the  lapse  factor  into  premium  calculations. 

The  only  tenable  argument  to  be  made  in  favor  of  considering  the  lapse  element 
is  that  material  reduction  may  be  had  in  rates  of  contribution,  in  order  to  bring 
them  within  the  financial  ability  of  poor  men.  If,  when  on  the  safe  side,  the  lapse 
rate  is  so  low  as  to  make  insignificant  reduction  in  contributions,  then  there  is  no 
sufficient  reason  for  introducing  this  lapse  factor  to  complicate  the  calculations  and 
disturb  the  regular  reserve  values. 

The  uncertain  and  variable  nature  of  the  lapse  rate  is  clearly  established  from 
the  lapse  experience  of  life  insurance  organizations,  and  it  would  appear  impossible 
to  settle  upon  any  uniform  schedule  of  assessment  rates  when  the  lapse  factor  enters 
into  their  computation. 

If  the  lapse  element  is  to  be  considered,  evidently  each  society  must  be  largely,  if 
not  altogether,  controlled  in  that  consideration  by  its  own  experience.  It  would  be 
extremely  hazardous  for  a  society  to  rely  upon  the  experienced  lapse  rate  of  some 
other  society. 

The  fact  of  remaining  with  or  withdrawing  from  a  society  is  determined  by  in- 
dividual volition,  and  the  moving  cause  for  the  exercise  of  human  volition  would  be 
impossible  to  predict  by  any  previous  record  of  its  exercise. 

With  the  representative  form  under  which  the  societies  generally  operate,  the 
cause  might  come  from  political  influences  or  from  disagreement  between  officials,  or 


189 

from  the  pernicious  activity  of  agents  and  representatives  of  other  organizations,  or 
from  any  one  or  more  of  a  hundred  influences  which  could  operate  upon  the  human 
will — a  thing  notoriously  fickle,  changeable,  and  unreliable. 

If  each  society  reduced  its  rates  of  contribution  in  an  amount  justified  by  its  own 
experience,  there  would  be  no  uniformity  in  the  resulting  schedules.  A  reference  to 
the  lapse  rate  of  the  Royal  Arcanum  and  the  Ancient  Order  of  United  Workmen,  as 
examples,  will  indicate  the  resulting  difference  in  the  rates  of  reduced  contribution. 

Were  the  societies  to  put  out  varying  schedules,  there  would  be  no  end  of  misrep- 
resentation to  the  public. 

As  a  practical  proposition,  it  would  seem  advisable  and  preferable  to  agree  upon  a 
uniform  schedule  of  rates  without  considering  the  lapse  element,  and  then  let  each 
society  return  to  its  members,  in  optional  form,  the  gains  from  forfeitures  after 
they  are  realized  through  actual  withdrawals. 

If  the  return  is  to  be  in  the  way  of  reducing  rates  of  contribution,  the  amount 
from  forfeitures  could  be  divided,  at  the  end  of  each  year,  and  the  contribution  of 
each  persistent  member  reduced  by  his  proportionate  share. 

By  this  method  the  reduction  would  be  after  the  fact,  and  there  would  be  no 
possibility  of  upsetting  calculations  by  creating  deficiencies,  as  under  the  method  of 
making  the  reductions  beforehand  upon  guess  and  estimate. 

The  persistent  member  would  receive  the  same  advantage  of  lapses,  and  those 
who  object  to  surrender  values  should  be  satisfied.  Each  society  would  stand  upon 
its  own  record,  as  it  should  do ;  the  members  of  each  would  receive  all  possible  benefit 
from  forfeitures,  because  they  would  share  in  a  division  of  all  the  gains  from  that 
source,  and  more  than  that  they  could  not  have,  even  though  an  over-estimate  promised 
more;  withdrawing  members  would  receive  no  part  of  their  accumulation,  and,  there- 
fore, would  be  punished  for  seceding;  and  so  all  of  the  conditions  would  be  fulfilled 
that  are  anticipated  by  those  who  would  risk  the  danger  of  estimated  and  assumed 
reduction  before  the  fact. 

I  desire  it  to  be  distinctly  understood  that  I  have  no  prejudice  against  using  the 
lapse  in  constructing  tables  from  which  to  derive  insurance  values  and  premiums. 
I  simply  have  no  confidence  in  the  reliability  of  such  tables,  because  I  can  find  no 
statistics  that  will  justify  such  confidence. 

I  do  not  believe  in  laying  down  any  hard  and  fast  rule  and  undertaking  to  apply 
it  to  all  cases  of  readjustment  of  existing  rates  of  assessment.  The  conditions  of 
societies  are  widely  different  in  respect  of  methods  of  management,  plans  of  opera- 
tion, character  of  membership,  and  original  rates  of  contribution.  Hence  the  necessity 
of  a  careful  investigation  of  the  affairs  of  each  organization  before  deciding  upon  the 
best  method  for  readjustment. 

It  is  well  known  that  I  advised  the  Readjustment  Committee  of  the  Modern 
Woodmen  of  America  to  ignore  the  lapse  element  in  the  preparation  of  rates.  How- 
ever, the  members  of  that  society  had  become  so  accustomed  to  very  low  rates  of 
contribution  that  they  protested  vigorously  against  the  schedules  proposed  by  the 
Readjustment  Committee,  and,  at  the  suggestion  of  the  Head  Consul,  I  prepared 
another  schedule  with  the  lapse  factor  considered.  This  schedule  was  offered  to  the 
Head  Camp  by  Delegate  Young,  under  the  name  of  the  "Hawes  Plan"  as  a  sub- 
stitute for  the  committee's  rates.  But  the  representatives  of  the  Modern  Woodmen 
of  America  were  not  willing  to  accept  the  concession,  and  did  what  so  many 


190 

other  similar  bodies  have  done,  adopted  a  makeshift,  devised  on  the  spur  of  the 
moment  by  those  wholly  ignorant  of  the  true  relation  between  promised  contribu- 
tions and  promised  benefits. 

In  such  an  emergency  as  that  in  which  the  officials  of  the  Modern  Woodmen  of 
America  were  placed,  during  the  desperate  struggle  to  put  their  society  upon  a 
sound  basis,  I  could  favor  the  trial  of  rates  reduced  by  an  estimated  gain  from 
forfeitures  through  lapse. 

I  would  advise  against  any  such  estimate.  I  have  endeavored  to  support  my 
opinion  by  facts  in  reference  to  lapse  rates  experienced  by  different  organizations, 
and  by  reference  to  opinions  of  the  leading  actuaries  on  both  sides  of  the  Atlantic. 
It  seems  to  me  that  the  almost  unanimous  conclusion  of  the  experts  should  satisfy 
us  that  resort  should  only  be  made  to  the  use  of  the  lapse  element  in  those  cases 
of  revision  of  assessment  rates  where  excessive  loading  is  necessary  to  provide  for 
deficiencies  of  existing  old  members.  It  were  as  well  to  ignore  expert  advice  altogether 
as  to  fly  in  the  face  of  an  almost  universal  opinion  against  consideration  of  the  lapse 
element  in  premium  calculations. 

I  cannot  dismiss  this  part  of  the  discussion  without  quoting  the  following  from 
Mr.  George  King's  lecture,  "Facts,  Fallacies  and  Fancies  in  Life  Insurance" : 

"The  company  which  takes  account  of  discontinuances  in  calculating  its 
premiums,  requires  to  make — and  I  can  prove  it  by  mathematics — a  consid- 
erably higher  reserve  than  a  company  charging  the  ordinary  level  premiums. 
Therefore  it  is  utterly  fallacious  for  assessment  or  natural  premium  officers 
to  argue  that  because  they  trust  to  discontinuances  they  do  not  require  large 
reserves.  A  premium  calculated  to  allow  for  discontinuances  is  naturally  lower 
than  the  premium  calculated  for  mortality  only,  because  the  surrender  values 
of  the  policies  which  it  is  assumed  will  lapse  are  applied  in  reduction  of 
premium.  Now  it  is  found  that  discontinuances  take  place  in  great  proportion 
in  the  early  years  of  the  policies,  and  that  when  policies  have  been  in  ex- 
istence, say  ten  or  fifteen  years,  discontinuances  practically  cease.  All  the  dis- 
continuances take  place  in  the  early  years,  and  when  a  man  has  kept  up  a 
policy  for  a  certain  time  he  keeps  it  up  to  the  end.  Now,  the  premium  being 
lower  than  the  ordinary  level  premium,  and  the  risk  being  the  same,  and  the 
premium  being  part  of  the  assets  relied  upon  by  the  office  in  order  to  meet  the 
claim,  it  follows  that  the  other  part  of  the  assets — namely,  the  reserves — must 
be  increased.  So  that  if  the  premium  is  reduced  by  the  application  of  lapses, 
to  lower  the  premium,  then  the  reserves,  on  the  other  hand,  must  be  increased, 
so  as  to  get  a  perfect  balance  between  the  liabilities  and  assets.  Now  by  these 
simple  considerations  you  can  see  that  a  company  which  trusts  to  discontinu- 
ances in  order  to  reduce  its  rates  must,  if  it  is  to  remain  permanently  solvent, 
make  larger  reserves  than  a  company  which  charges  the  ordinary  premium 
based  upon  mortality  only." 


EXAMPLES  OF  DISCOUNTED  RATES. 

I  now  come  to  that  part  of  my  presentation  which  should  especially  hold  attention, 
because  it  deals  with  the  practical  side  of  the  subject,  as  it  directly  relates  to  that 
ever-existing  condition  of  securing  and  losing  members,  and  the  expense  of  field 
work,  with  some  bearing  on  the  effect  of  competition.  To  immediately  get  at  the 
pith  of  the  matter,  I  present  a  number  of  schedules  of  level  annual  premiums  on  the 
basis  of  mortality  alone,  and  on  the  basis  of  mortality  and  lapse  considered.  Only  a 
few  sample  ages  are  given : 


191 


Age. 

A.  0.  U.  W. 
(By  Eldridge.) 

P.  H.  C. 
(By  Barnard.) 

I.  0.  F. 
(By  Rea.) 

Without  Lapse 

(Net.) 

With  Lapse 
(Net.) 

Without  Lapse 

(Net.) 

With  Lapse 
(Net.) 

Without  Lapse 
(Gross.) 

With  Lapse 

(Gross.) 

25 
30 
35 
40 
45 
50 

$13.68 
15.00 
19.00 
22.95 
28.16 

$  9.69 
9.40 
11.58 
14.21 
17.29 

$12.48 
14.64 
17.40 
21.12 
25.92 
32.52 

$10.20 
12.00 
15.00 
18.60 
24.00 
31.20 

$12.03 
14.29 
17.37 
21.70 
28.00 
37.66 

$10.90 
13.16 
16.08 
20.36 
26.81 
35.96 

Age. 

ILLUSTRATIVE 
(By  I.  P.  Mantz.) 

ILLUSTRATIVE 
(By  Hunter.) 

M.  W.  of  A. 
(By  Landis.) 

Without  Lapse 
(Net.) 

With  Lapse 
(Net.) 

Without  Lapse 
(Net.)      ' 

With  Lapse 

(Net.) 

Without  Lapse 

(Net.) 

With  Lapse 

(Net.) 

25 
30 
35 
40 
45 
50 
55 
60 

$11.91 
13.96 
16.62 
20.11 
24.72 
30.91 
39.36 
51.13 

$10.32*** 
12.08 
14.47 
17.41 
21.88 
26.82 
34.37 
45.96 

$16.25 

$14.56** 

$12.48 
14.64 
17.40 
21.12 
25  92 

$11.64* 
13.56 
16.20 
19.80 
24.60 
32.52 

25.89 
59  '.87 

23.66 

55.25 

32.52 

NOTE.— ***These  rates  are  based  upon  a  mortality  rate  according  to  the  National  Fraternal  Congress  Table,  and 
upon  lapse  ratios  reported  to  the  nineteenth  M.  U.  B.  A.  convention.  **Double  lapse  rate  here  considered.  With  normal 
lapse  rate,  the  premiums  given  by  Mr.  Hunter  were,  age  25,  $15.48;  age  40,  $24.83;  age  60,  $57.64.  *Seventy~two  cents  were 
added  to  these  rates  at  each  age  to  48  years  of  age,  the  same  being  a  "fraternal  rate"  to  maintain  a  level  premium  of  $30.00 
annually  for  existing  members  above  48  years  of  age.  In  consequence,  the  premiums  offered  with  lapse  we're  nearly  the  same 
as  the  regular  net  premiums  without  lapse.  The  effect  of  lapse  was  not  considered  above  age  47. 

The  reduction  made  by  Mr.  Eldridge  for  the  Ancient  Order  of  United  Workmen, 
from  the  rate  without  lapse,  is  very  considerable,  because  the  withdrawals  from  that 
society  were  very  great  prior  to  1896,  before  the  old  classified  plan  was  adopted. 
The  lapse  experience  investigated  by  Mr.  "Eldridge  was  prior  to  1896. 

The  reduction  from  regular  rates  made  by  Mr.  Barnard  for  the  Protected  Home 
Circle  is  likewise  considerable.  Mr.  Barnard,  in  his  report  to  the  society,  does  not 
give  the  basis  for  his  modification,  but  it  is  presumed  that  he  followed  the  suggestion 
made  by  Mr.  Whiting  some  years  ago.  When  the  rates  were  prepared  for  the 
Protected  Home  Circle,  unfortunately  the  lapse  experience  of  the  society  was  not 
available,  and  hence  it  cannot  be  known  whether  or  not  the  reduction  or  modification 
accords  with  that  experience. 

Mr.  Rea  and  Mr.  Pipe  based  the  regular  and  reduced  rates  of  the  Independent 
Order  of  Foresters  upon  the  actual  experience  of  that  society,  and  the  reduction  is 
not  very  great. 

Mr.  Hunter  worked  out  sample  rates  for  illustration,  as  was  also  the  case  of 
Mr.  Mantz;  The  former  took  the  Hm  Table  of  Mortality  and  double  the  normal 
lapse,  and  the  latter  used  the  National  Fraternal  Congress  mortality  and  the  lapse 
ratios  of  the  Mutual  Underwriters  Benefit  Associations.  Mr.  Landis  used  the  National 


192 

Fraternal  Congress  rates  and  discounted  them  on  the  basis  of  the  Modern  Woodmen 
twenty  years'  experience. 

The  results  of  these  several  efforts  reflect  what  might  be  expected  in  the  way  of 
variety  were  all  of  the  societies  of  America  to  have  rates  prepared  with  lapse  element 
considered. 

The  results  certainly  show  that  it  would  be  impossible  to  secure  a  uniform 
schedule  for  all  of  the  societies.  We  must  picture  the  situation  from  the  standpoint 
of  a  variety  of  schedules.  Then  what  would  be  the  practical  effect  of  them? 

First.  Each  society  would  be  forced  to  make  out  special  reserve  values,  base, 
their  valuations  on  specially  prepared  tables,  or  value  upon  standard  tables  modified. 

Second.  Each  society  would  be  compelled  to  have  its  affairs  so  managed  as  not 
to  have  a  lapse  rate  lower  than  assumed,  and  hence  the  officers  could  not  exert 
themselves  to  the  utmost  to  prevent  secessions,  but  might  be  forced  to  cause  lapses 
should  the  members  be  possessed  of  an  extra  confidence  beyond  that  assumed  for 
them. 

Third.  The  great  reduction  in  rates,  like  those  of  Mr.  Eldridge  for  the  Ancient 
Order  of  United  Workmen,  and  Mr.  Barnard  for  the  Protected  Home  Circle,  would 
require  a  heavy  lapse  rate,  and  in  time  would  require  strenuous  activity  in  the  field 
in  order  to  replace  withdrawing  members  by  new  ones  to  prevent  a  net  loss  in 
membership  and  ultimate  dissolution.  This  strenuosity  would  call  for  the  sinews  of 
war  in  the  shape  of  more  money  for  extension  purposes.  This  increased  demand  for 
expense  funds  would  offset  the  gains  from  forfeitures,  and  the  management  would  soon 
be  brought  to  face  a  deficiency,  or  be  forced  to  ask  for  an  increase  in  the  expense 
contributions  equal  to  the  reduction  in  net  mortality  premiums,  with  the  result  that  the 
society  would  have  rates  equal  to  the  regular  premiums  without  lapse  but  with  all 
of  the  advantages  of  surrender  values.  The  management  could  not  seek  relief  in 
preventing  lapses,  beyond  the  number  assumed,  because  that  would  invite  insolvency. 
The  management  must  secure  enough  new  members  to  make  good  those  going  out 
by  lapse  and  death,  and  some  additional  for  healthy  growth,  otherwise  the  society 
would  go  into  decay.  If  any  one  can  work  out  an  advantage  from  the  assumption 
of  a  high  lapse  rate  in  order  to  obtain  low  net  premiums,  it  is  more  than  is  indicated 
in  this  presentation,  and  more  than  I  can  see  from  a  practical  view  of  the  situation. 

THE  INSURANCE  RISK. 

The  mortality  table  enables  the  actuary  to  determine  the  risk  to  death  assumed  by 
the  society  on  the  insured  life,  which  is  an  increasing  risk  with  increasing  age. 

But  there  are  conditions  other  than  age  which  affect  the  risk,  such  as  occupation, 
residence  and  the  period  of  promised  protection. 

The  added  contribution  necessary  to  provide  for  the  extra  occupation  and  resi- 
dence risk  is  omitted  from  consideration  in  the  first  computation  to  obtain  the  rate 
for  the  death  benefit  as  an  ordinary  risk.  The  extra  required  contribution  is  separately 
determined. 

But  the  period  of  protection  must  be  considered  in  the  first  instance,  and  only 
that  portion  of  the  mortality  table  is  employed  which  corresponds  to  the  period 
covered  by  the  protection  from  age  of  entry  to  the  terminating  age. 

The  society's  risk  may  be  increased  also  by  the  addition  of  other  than  death  benefits. 

,The  promise  may  include  claims  on  account  of  accidents,  or  sickness,  or  old  age, 
the  inclusion  of  any  one  of  which  will  require  an  extra  contribution  over  that  for 
a  death  benefit  only. 


193 

To  provide  for  accident  benefits  a  level  and  equal  rate  for  all  ages  is  usual.  And 
most  of  the  American  companies  have  a  level  and  equal  premium  to  age  50  for  health 
(or  sickness)  benefits,  and  a  somewhat  higher  equal  rate  for  ages  above  50.  However, 
the  sickness  rate  increases  with  increasing  age,  and  the  companies  only  save  them- 
selves from  the  troubles  which  have  come  to  the  Friendly  Societies  by  reserving  the 
right  to  cancel  contracts  at  their  option. 

Recently  much  interest  has  been  taken  in  Total  Permanent  Disability  Benefits,  and 
I  have  given  tables  in  respect  of  them.  In  1903  I  obtained  the  first  American  Dis- 
ability Experience  from  the  Knights  of  the  Maccabees  of  the  World  and  other  So- 
cieties, and  from  the  data  constructed  the  first  Total  Permanent  Disability  Tables. 
Since  that  time  I  have  furnished  the  statistics  to  other  actuaries  who  have  prepared 
from  them  elaborate  tables  in  connection  with  the  American  Experience  Table  of 
Mortality. 

For  contribution  rates  for  sickness  benefits,  other  than  for  one-year  renewable 
term  contracts,  the  Manchester  Unity  or  Sutton's  Tables  are  employed. 

The  day  has  passed  when  guessing  should  be  resorted  to  in  the  matter  of  con- 
tributions adequate  to  provide  for  promised  benefits. 

Mortality,  Sickness  and  Total  Permanent  Disability  Tables  are  well  established 
and,  at  moderate  cost,  any  insurance  organization  can  have  computed  contribution 
rates  for  any  character  of  insurance  protection. 

VARYING   BENEFITS. 

Not  only  can  level  contribution  rates  be  computed  for  a  uniform  benefit,  but  the 
tables  enable  the  actuary  to  determine  the  rate  for  increasing  or  decreasing  benefits. 
In  all  cases,  at  the  inception  of  the  insurance  contract,  the  present  value  of  the 
future  contributions  must  be  equal  to  the  present  value  of  the  promised  benefits. 
Equity  requires  and  solvency  demands  this  condition. 

The  simplest  form  of  contract  in  respect  of  assessments  is  the  case  of  the  level 
and  uniform  contribution  rate  graded  to  ages  when  the  payments  commence  and  for 
a  uniform  benefit  payable  at  death. 

From  Exhibits  i  and  2  it  is  demonstrated  that  the  Present  Value  of  the  Promised 
Benefit  is  equal  to  the  Present  Value  of  the  sum  insured  and  is  equal  to  the  Single 
Payment  to  provide  for  the  Yearly  Instalments  of  Claims. 

From  Exhibits  i  and  2  it  is  demonstrated  that,  at  the  inception  of  the  insurance 
contract,  the  future  contributions  to  provide  for  the  Yearly  Instalments  of  Claims, 
is  equal  in  value  to  the  Single  Payment  and  is  equal  in  value  to  the  Promised  Benefit, 
and  that  the  Present  Value  of  the  Annual  Contribution  is  obtained  from  its  multipli- 
cation by  the  Whole  Life  or  Temporary  Annuity. 

I  have  avoided  symbols,  but  for  the  sake  of  brevity  occasionally  they  must  be  used. 
A=The  Single  Payment, 

=  Present  Value  of  Sum  Insured, 
a  =  Present  Value  of  an  Annuity, 

=  Present  Value  of  $1.00  Paid  Annually. 
P  =  Level  Annual  Premium, 
=  Level  Annual  Contribution. 

Then  commit  to  memory  the  following  equations  and  we  will  have  ended  the  first 
lesson : 

A=PXa, 

=  Present  Value  of  Promised  Benefits, 
P=A-s-a, 
a  =  A-rP, 

P Xa  =  A,  =  Present  Value  of  Future  Contributions, 
=  Present  Value  of  Promised  Benefits, 


194 


AT  THE  INCEFHON  OF  THE  CONTRACT.  Note  well  that  the  above  equations  are  true, 
under  adequate  rate  schedules,  at  the  moment  the  insurance  contract  is  made,  but 
may  not  hold  true  in  any  subsequent  year.  After  the  first  contribution  payment,  the 
present  value  of  future  contributions  is  less  than  the  present  value  of  the  promised 
benefit,  and  reserve  accumulation  is  required  to  make  good  the  difference,  as  later 
will  be  explained. 

In  Exhibits  I  and  2  the  arithmetical  process  to  obtain  A  and  a  is  clearly  and  in 
great  detail  set  forth,  both  on  the  whole  life  and  on  the  temporary  or  term  basis, 
and  in  respect  of  death  benefit  only  and  of  combined  death  and  endowment  benefits 

In  all  of  the  cases  mentioned  the  foregoing  three  equations  hold  true. 

And  further : 

A  =  The  Benefit  Side, 
PXa=The  Payment  Side 

of  the  Level  Premium  Insurance  Contract,  and  at  the  inception  of  this  contract,  the 
Benefit  Side  must  equal  the  Payment  Side,  and  this  rule  holds  in  all  cases. 

Instead  of  the  Benefit  being  for  a  uniform  amount  as  assumed  in  Exhibit  i,  sup- 
pose that  the  promise  is  to  pay  $700  in  the  first  year,  $800  in  the  second  year,  $900 
in  the  third  year  and  $1,000  thereafter,  thus  having  a  varying  in  place  of  a  uniform 
benefit.  Then  how  would  we  determine  its  Present  Value? 

The  process  is  identical  with  that  for  finding  A  when  the  benefit  is  $1,000  from 
the  beginning  of  the  insurance.  Thus : 


Beginning  of 
Years. 

Number  Living  Begin- 
ning of  Years. 

Amount  of 
Certificate. 

Total 
Protection. 

1 
2 
3 
4 

92,215 
91,648 
90,070 
90,479 

$  700 
800 
900 
1000 

$64,  550,  ,500 
73,318,400 
81,063,000 
90,479,000 

After  the  completion  of  the  third  year  the  protection  is  on  the  basis  of  $1,000  and 
the  total  for  each  year  is  1,000  times  the  number  living  as  found  in  the  mortality 
table.  So  also  the  yearly  instalments  of  claims  after  the  third  year  is  1,000  times  the 
number  dying  as  given  in  the  mortality  table  and  also  in  Exhibit  i. 

The  instalments  of  claims  must  be  determined  from  multiplying  the  total  protec- 
tion by  the  probability  of  dying.  Thus : 


Beginning  of 
Years. 

Total 
Protection. 

Probability 
of  Dying. 

Instalment 
of  Claims. 

1 

2 
3 
4 

$64,550,500 
73,318,400 
81,063,000 
90,479,000 

.0061487 
.0063067 
.0064895 
.0066977 

$397,000 
462,000 
526,000 
606,000 

Where  the  protection  begins  with  $1,000  the  total  protection  is  $92,215,000,  and 
the  first  year's  instalment  of  claims  is  $567,000.  When  the  protection  begins  at  $700, 
the  total  is  $64,550,500  and  the  first  year's  instalment  of  claims  is  $397,000,  with 
similar  reductions  in  the  second  and  third  years. 


195 


After  the  third  year  the  instalments  of  claims  obviously  are  the  same  as  in  Exhibit 
i.  since  the  basis  is  $1,000  for  each  person. 

To  find  the  Present  Values  of  the  Instalments,  we  adopt  the  identical  procedure 
as  for  Exhibit  I.  Thus: 


Beginning  of 
Years. 

Yearly  Instalments 
of  Claims. 

Present  Value 
of  $1.00. 

Present  Value 
of  Claims. 

1 
2 
3 

4 

$397,000 
462,000 
526,000 
606,000 

.961538 
.924556 

.888996 
.854804 

$381,630.00 
427,510.00 
467,650.00 
518,010.00 

The  succeeding  years  to  the  end  of  the  sixty-fourth  year  would  be  identical  with 
Exhibit  i.  But  the  total  of  the  claims  would  be  $91,864,000,  instead  of  $92,215,000,  and 
the  total  of  their  Present  Values  is  $27,490,473.44,  instead  of  $27,818,663.44. 

However,  the  Number  Living  at  the  Beginning  of  Years  would  not  be  changed 
by  the  fact  that  each  person  received  less  than  $1,000  of  protection  during  the  first 
three  years  of  membership,  and  the  amount  of  yearly  instalments  of  contributions 
of  $1.00  at  beginning  of  years  by  each  person  living  would  not  be  changed,  and 
hence  Exhibit  2  would  remain  unchanged. 

Therefore,  we  would  have  the  same  total  of  Present  Values  of  Contribution  In- 
stalments, $1,674,337.74  as  the  divisor  into  $27,490,473.44  (the  reduced  total  of  Present 
Values  of  claims),  giving  $16.42  as  the  Level  Annual  Contribution  Whole  Life  Rate 
at  age  35,  where  $700  is  paid  at  death  in  the  first  year,  $800  in  the  second,  $900  in 
the  third,  and  $1,000  thereafter. 

The  Level  Annual  Whole  Life  Rate  is  $16.62  when  $1,000  is  payable  in  all  years. 
The  scaling  of  $300  in  the  first  year,  $200  in  the  second,  and  $100  in  the  third  reduces 
the  annual  rate  by  20  cents. 

If  the  protection  began  at  $700  in  the  first  year  and  increased  by  a  given  amount 
each  year  to  the  end  of  "Life  Expectancy,"  say  by  the  uniform  amount  of  $10,  then 
we  would  multiply  the  "Number  Living"  at  the  beginning  of  the  first  year  by  $700; 
at  beginning  of  second  by  $710;  of  the  third  year  by  $720,  and  so  on  for  thirty  years, 
until  the  amount  equaled  $1,000.  The  protection  thus  obtained  would  be  multiplied 
by  the  "Probabilities  of  Dying"  to  get  the  Yearly  Instalments  of  Claims,  and  the 
latter  would  be  multiplied  by  the  interest  discount  factors  to  secure  the  Present 
Values,  the  total  of  which  would  be  divided  (for  age  35)  by  $1,674,337.74  to  obtain 
the  Level  Annual  Contribution  Rate. 

The  varying  benefit  only  affects  the  construction  of  Exhibit  i.  The  annuities  ob- 
tained from  Exhibit  2  remain  unchanged.  When  the  benefit  is  less  than  the  unit  of 
$1,000,  the  resulting  total  of  Present  Values  is  less  as  a  dividend,  and,  of  course,  the 
quotient  is  less  as  an  annual  rate. 

The  reduction  in  the  rate  by  giving  less  than  $1,000  during  "Life  Expectancy" 
is  much  exaggerated,  as  an  example  would  prove. 

If  there  were  a  decreasing  instead  of  an  increasing  benefit,  the  process  to  find 
the  yearly  instalments  of  claims  and  their  present  values  would  be  identical  with 
that  shown  for  increasing  benefits. 

The  annual  contributions  for  Term,  Limited  Pay  and  Endowment  varying  benefits 
could  be  obtained  by  use  of  temporary  single  premiums  as  explained  for  Exhibits 
i  and  2. 


196 

VARYING   CONTRIBUTIONS. 

Suppose  the  rate  of  contribution  is  to  increase  or  decrease  for  a  number  of  years, 
then  how  can  such  a  varying  annual  contribution  rate  be  determined? 
The  simplest  demonstration  of  the  process  is  to  employ  the  equation 
Benefit  Side=Payment  Side,  or 


But  P  is  to  vary  from  year  to  year,  say,  for  three  years.  Then  let  P'  be  the  initial 
contribution  and  that  it  be  increased  by  2  for  three  years  and  afterward  remain  level. 

P',  being  the  initial  rate,  must  be  paid  through  the  period  of  protection,  and  ob- 
viously its  value  is 

P'Xa. 

The  first  increase  at  the  end  of  the  first  year  is  2,  which  must  be  paid  through 
the  period  of  protection,  beginning  the  second  year.  Obviously  the  present  value  of 
this  first  increrase  is  2  multiplied  by  the  present  value  of  $1.00,  paid  annually,  begin- 
ning the  second  year. 

Similarly  the  second  increase  in  the  rate  by  2  is  made  at  the  end  of  the  second 
year  and  its  present  value  is  2  multiplied  by  the  present  value  of  the  annuity  of  i, 
beginning  the  third  year. 

Likewise  the  present  value  of  the  third  increase  of  2  is  the  product  of  its  mul- 
tiplication by  the  annuity,  beginning  the  fourth  year. 

Let  i  |a,  2  |a  and  3  |a  stand  for  the  value  of  the  annuities  deferred  one,  two  and  three  years. 
Then  the  equation  becomes 

A  =  P'a+2Xi  |a+2X2  |a+2X3  |a, 

with  the  last  three  terms  discounted  one,  two  and  three  years. 

Let  v1  represent  the  value  of  $1.00  discounted  for  one  year,  v2  =  discounted  value  for  two 
years,  and  v3  =  discounted  value  for  three  years.  Then  the  equation  becomes, 

A-[vK2Xi  |a)+v2(2X2  |a)+v3(2X3  |a)]  =  P'Xa. 
dividing  through  by  a,  we  have 

p,  =  A-[v'(2Xi  |  a)+v»(2X2  |a)+v»(2X3  1  a)] 
a 

For  age  35  we  found  (from  Exhibit  2)  that  a  (the  whole  life  annuity  single  premium)  was 
$18.16. 

i  |a  would  be  the  single  premium  for  the  whole  life  annuity  at  age  one  year  hence,  or  age  36, 
and  it  could  be  found  by  constructing  a  table  for  age  36  similar  to  Exhibit  2  for  age  35. 

Also  ?  |a  and  3  la  represent  annuities  beginning  two  and  three  years  hence,  or  at  ages  37  and 
38,  and  could  be  determined  by  a  process  similar  to  that  illustrated  by  Exhibit  2. 

The  single  premiums  for  whole  life  annuities  at  ages  36,  37  and  38  are  $17.95,  $17.94  and 
$17.53,  respectively. 

The  values  of  $1.00  due  one,  two  and  three  years  hence  (discounted  at  4  per  cent)  are  .961538, 
.924556  and  .888996,  respectively. 

We  have  already  found  that  A35  (the  single  premium  for  the  purchase  of  $1,000  promised 
death  benefit)  was  $301.68. 

Substituting,  the  equation  becomes, 

„,    301.68-.9615(35.90)+.9246(35.48)+.8890(35.06)     301.68-98.50    ( 

P'  =  —  jg  16  Igl6  -  =  $11.19  equal  the  initial 

contribution  at  age  35,  and  when  increased  by  $2.00  for  three  years  would  give  the  level  annual 
rate  after  three  years  ($11.19  plus  $6.00),  or  $17.19.  And  this  instead  of  $16.62  as  the  level 
annual  rate  from  the  beginning. 


197 

The  employment  of  temporary  single  premiums  for  annuities,  as  explained  in  con- 
nection with  Exhibits  I  and  2,  will  enable  the  computer  to  obtain  increasing  or  de- 
creasing contribution  rates  for  term,  limited  payment  and  endowment  contracts. 

The  foregoing  tedious  details  are  excusable  only  for  the  reason  that  they  are 
made  for  those  who  want  arithmetical  examples  of  the  method  of  computing  con- 
tribution rates. 

They  are  presented  with  the  hope  that  the  simplicity  of  the  illustrations  will  dispel 
the  'Common  fallacy  concerning  "Life  Expectancy"  as  a  factor  entering  into  the  com- 
putation of  level  annual  contribution  rates. 

SHORT  CUTS  OF  CALCULATIONS. 

To  follow  the  method  of  computation  illustrated  in  the  Exhibits  and  explained  for 
varying  benefits  and  contributions  would  require  the  extended  columns  for  each  age 
of  entry  as  shown  for  age  35. 

Short  cuts  in  the  way  of  "Commutation  Columns"  have  been  devised,  and  the 
understanding  of  them  appears  to  be  a  serious  difficulty  with  those  who  are  not 
expert  mathematicians. 

I  will  try  to  make  a  simple  explanation  of  their  construction  and  use. 

Refer  to  Exhibit  I  and  note  that  the  first  thing  is  the  determination  of  the  "yearly 
instalments  of  claims"  expected  to  mature  during  the  period  of  protection.  The 
actual  process  is  better  illustrated  by  Exhibit  3,  when  the  yearly  instalments  are  not 
the  tabular  number  dying  as  given  in  the  mortality  table. 

The  second  process  is  to  obtain  the  present  value  of  the  yearly  instalments  of 
claims,  which  is  accomplished  by  multiplying  the  amount  for  each  year  by  the  present 
value  of  $1.00  discounted  for  one,  two  and  so  forth  years. 

In  the  illustrations  the  value  of  $1.00  due  one  year  hence  is  the  multiplier  for  the 
first  year's  instalment  of  claims. 

Instead  of  using  this  as  the  first  discount  factor  to  form  the  first  "commutation  column," 
designated  Cx,  we  take  the  value  of  $1.00  due  one  year  after  the  year  represented  by  the  age  for 
which  the  computation  is  to  be  made.  We  do  this  because,  for  convenience,  it  is  assumed  that 
Cx  =  dxvx+  J.  In  other  words  the  value  for  C  for  any  age  as  x  is  equal  to  the  product  of  the  num- 
ber dying  at  that  age  by  the  present  value  of  $1.00  due  in  a  period  of  time  one  year  greater  than 
age  x. 

That  is  to  say,  from  Exhibit  i  for  age  35  we  would  take  the  value  .243669,  oppo- 
site the  year  36,  instead  of  .961538,  opposite  the  year  I. 

Beginning  with  the  youngest  age  given  in  the  mortality  table  (age  20  for  the 
X.  F.  C.)  we  would  take  the  value  of  $1.00  due  the  year  hence  represented  by  the 
age  one  year  older  than  the  youngest  (or  in  21  years)  as  the  multiplier  to  represent 
the  claims  maturing  in  the  first  year  of  age,  and  thereafter  successively  use  the  corre- 
sponding present  values  of  $1.00  and  yearly  instalments  of  claims  to  the  end  of  the 
mortality  table. 

Turn  to  Table  II  of  the  Appendix. 

In  the  first  column,  headed  x,  are  the  ages. 

In  the  second  column,  headed  vx,  are  the  present  values  of  $1.00,  the  first  being  the 
value  20  years  hence,  .456387,  and  is  the  same  as  used  in  the  exhibits  for  the  twen- 
tieth year. 

In  the  sixth  column,  headed  Cx,  are  the  amounts  corresponding  to  the  present 
values  of  the  yearly  instalments  of  claims  on  the  basis  of  i.oo  instead  of  1,000. 

That  is  to  say,  the  first  value  of  C»  (219.416801)  is  the  product  of  500  (the  num- 
ber dying  at  age  20)  by  i.oo  (the  unit  of  benefit)  by  .438834  (the  present  value  of 
i.oo  tiventy-one  years  hence). 


198 

This  value  of  Cao  corresponds  to  the  present  value  of  the  instalments  of  claims 
.in  Exhibit  I,  except,  as  stated,  the  promised  benefits  are  on  the  basis  of  $1.00  for 
each  death  instead  of  $1,000. 

In  Table  i  of  the  Appendix,  the  third  column,  headed  dx  (number  dying),  giv^s 
the  number  of  tabular  deaths  during  each  year  of  age,  and  these  multiplied  by  $1.00 
will  give  the  yearly  instalments  of  claims  on  the  assumption  of  paying  $1.00  at 
each  death. 

Multiplying  each  of  these  yearly  instalments  of  claims  by  the  value  of  $1.00  for 
the  year  one  age  advanced,  the  amounts  corresponding  to  the  present  values  of  the 
claims  are  obtained  as  given  in  column  Cx  of  Table  2,  which  are  of  identical  char- 
acter to  those  obtained  for  ages  35  to  98  of  Exhibit  i,  excepting  as  to  the  unit  of 
protection  as  heretofore  explained. 

If  we  take  the  total  of  the  values  in  the  Cx  column  of  Table  2  from  any  given 
age,  this  total  can  be  used  to  obtain  the  single  payment  to  provide  for  the  promised 
benefits  at  that  age,  in  a  similar  manner  to  that  of  finding  the  single  premium  for  the 
protection  at.  age  35  in  Exhibit  i. 

However,  by  summing  the  Cx  column  of  Table  2  from  the  oldest  to  the  youngest 
age,  and  recording  the  subtotals  for  intervening  ages,  at  once  the  total  for  any  giver, 
age  is  obtainable.  Thus  : 

The  oldest  age  is  98  and  the  present  value  of  the  claims  expected  to  mature  in 
the  last  year  of  age  is  .061776.  Starting  with  that  value,  the  process  would  be  (omit- 
ting the  sixth  decimal)  : 

Value  at  98  of  C 06178  =  M9S 

Value  at  97  of  C ..  .14991 


Total  at  97  of  C 21169  =  M97 

Value  at  96  of  C..  .42317 


Total  at  96  of  C 63486  =  M9, 

Value  at  95..  ..1.01918 


Total  at  95  of  C 1  .G5404  =  M95 

and  similarly  to  the  youngest  age  20.  The  sum  of  the  values  of  Cx  are  recorded  in 
the  seventh  column  of  Table  2  under  the  title  of  MX=SCX  (S  is  the  Greek  letter 
sigma,  and  stands  for  "summation"). 

The  number  9669.13897,  opposite  age  20,  is  the  total  of  the  numbers  in  column 
Cx  from  20  to  98,  inclusive. 

The  number  7049.68360,  ooposite  age  35,  is  the  total  of  the  numbers  for  ages  35 
to  98  in  column  Cx.  And  similarly  for  other  numbers  in  column  Mx,  they  are  the 
respective,  totals  for  the  opposite  ages  to  the  end  of  the  Mortality  Table,  and  corre- 
spond to  the  total  for  age  35  to  98  in  Exhibit  i. 

Now  assuming  that  each  person  living,  given  in  column  2  of  Table  I,  paid  $1.00 
at  the  beginning  of  the  year  (precisely  as  done  in  the  illustration  by  Exhibit  2,  but 
commencing  at  age  20  instead  of  35),  we  form'a  column  of  yearly  instalments  of  con- 
tributions, as  in  Exhibit  2. 

The  first  payment  at  age  20  by  the  100,000  living  would  give  immediately  $100,000. 

In  Exhibit  2  the  92,215  persons  living  at  age  35  paid  $92,215  immediately,  and  it 
was  entered  at  its  face  value  of  $92,215  in  the  column  of  present  values  of  yearly 
instalments  of  yearly  contributions,  because  it  was  in  hand'  at  the  beginning  of  the 
insurance. 

But  the  treatment  is  now  changed  by  the  employment  of  the  present  values  of  $1.00 
for  years  corresponding  to  years  of  age. 


199 

Therefore,  instead  of  multiplying  $100,000  by  i.oo,  we  multiply  by  the  value  of 
i. oo  twenty  years  hence,  or  .456387,  as  given  in  the  column  vx  of  Table  2,  oppo- 
site the  year  20  in  Exhibit  i. 

The  product,  to  six  decimal  places,  is  given  in  column  Dx  of  Table  2,  being 
45638.694620=020. 

The  column  Dx  of  Table  2  corresponds  to  the  column  of  Present  Vialues  of 
Yearly  Instalments  of  Contributions  of  Exhibit  2.  The  only  difference  being  in  the 
fact  that  the  yearly  instalments  of  contributions  are  multiplied  by  the  present  value 
of  $1.00  for  the  year  equal  to  the  insurance  age  instead  of  the  year  of  insurance 
duration. 

At  this  point  it  is  well  to  observe  that  in  the  Tables  of  Values  a  unit  of  I  is 
taken  for  the  amount  of  contribution,  and  hence  denominations  of  dollars  and  frac- 
tions thereof  are  omitted  or  understood. 

For  this  reason  the  number  living  (designated  by  lx)  are  taken  as  the  multipliers 
instead  of  the  amounts  of  $1.00  by  the  number  living.  Thus  at  age  20  the  number 
living  is  100,000,  and  multiplied  by  the  present  value  of  i  in  the  twentieth  year  would 
be,  as  stated,  45638.69462. 

The  present  value  of  i  is  designated  by  v;  and  where  the  value  is  taken  as  of 
the  insurance  age  (x)  then  it  is  designated  vx. 

The  number  living  is  designated  by  the  letter  1,  and  for  the  number  at  any  insur- 
ance age  a  suffix  is  added  for  the  given  age,  as  lao  for  the  number  living  at  age  20; 
and,  therefore,  lx  is  used  for  a  general  designation  of  the  column  of  the  number  living. 

When  the  number  living  is  multiplied  by  the  present  value  of  i,  the  general  ex- 
pression for  the  product  is  lxvx  which  is  further  designated  by  Dx  for  convenience 
and  brevity. 

Similarly,  the  number  dying  is  designated  by  the  letter  d.  For  a  given  age,  as  dw. 
And  generally,  d*. 

Omitting  monetary  considerations  and  making  the  insurance  unit  i,  then  we 
obtain  the  present  value  of  the  yearly  instalments  of  claims  by  using  the  tabular 
number  dying. 

As  before  stated,  we  take  the  present  value  of  i  for  the  year  one  year  advanced 
in  age  as  the  multiplier.  Therefore,  for  age  20  we  have  500  multiplied  by  .438833602, 
giving  219.416801,  being  dao  v21=C2o.  And  generally,  dxvx+1— Cx. 

Returning  to  the  discussion  of  the  column  Dx  of  Table  2,  which  corresponds  to  the 
present  value  of  yearly  instalments  of  contributions,  the  total  of  the  column  for  any 
age  can  be  used  to  obtain  the  single  premium  for  an  annuity,  similar  to  the  use  of 
the  column  of  present  values  of  contributions  in  Exhibit  2. 

In  a  manner  similar  to  that  heretofore  shown  for  summing  the  Cx  column,  we 
may  sum  the  Dx  column  of  Table  2  from  the  oldest  to  the  youngest  age  and,  recording 
the  subtotals  for  intervening  ages,  at  once  obtain  the  total  for  any  given  age.  Thus: 

Value  at  98  of  D 06425  =  N98 

Value  at  97  of  D .  22272 


Total  at  97  of  D 28697  =  N97 

Value  at  96  of  D .  67173 


Total  at  96  of  D 95870  =  N96 

Value  at  95  of  D . .  1 . 75856 


Total  at  95  of  D 2.71726  =  N95 

and  similarly  to  the  youngest  age  20.     The  sum  of  the  values  of  Dx  are   recorded 
in  the  fourth  column  of  Table  2  under   the  title  of   NX= 


200 

The  totals  in  the  Nx  column  represent  the 

Payment  Side 

of  the  insurance  contract,  because  they  are  derived  from  expected  yearly  instalments 
of  contributions. 

The  totals  in  the  Mx  column  represent  the 

Benefit  Side 

of  the  insurance  contract,  because  they  are  derived  from  the  expected  yearly  instal- 
ments of  claims  for  benefit. 

To  obtain  the  level  annual  contribution  rate  for  any  age  it  is  only  necessary  to 
divide  the  number  in  the  Mx  column  by  the  number  in  the  Nx  column  opposite  the 
given  age.  Thus : 

Benefit  Side          Payment  Side         Annual  Rate 
7049.68360      -h  424294.62475  =         .01662 
M35  N35  P35 

If  the  result  is  desired  on  the  basis  of  $1,000,  multiply  by  1,000,  and  we  have 
1,000  Pss — $16.62?=  Annual  Rate,  which  is  identical  with  the  result  obtained  from  Ex- 
hibits I  and  2  for  the  whole  life  level  annual  contribution  to  provide  a  death  benefit 
of  $1,000. 

The  same  principle  obtains  in  the  use  of  the  Mx  and  the  Nx  columns  to  secure  the 
level  annual  contribution  for  term  or  limited  Payment  or  Endowment  Insurance 
contracts.  Thus : 

Benefit  Side         Payment  Side 
(MX-MX+20)     -=-    (NX-NX+20) 

gives  the  level  annual  contribution  rate  for  an  insurance  of  i   for  a  term  of  twenty 
years.    In  figures  taken  for  age  35  from  the  Mx  and  Nx  columns  of  \Table  2,,  we  have 

Benefit  Side  Payment  Side 

(7049 . 68360  -  4477 . 07072)  -i-  (424294 . 62475  - 1 13737 . 2 1 570) 

M35  M55  N35  N55 

The  annual  contribution  for  a  term  to  age  70  would  be 

Benefit  Side  Payment  Side 

(7049 . 68360-2232 . 70894)  -r-  (424294 . 62475  -  24269 . 33480) 
M35  M70  N35  N70 

The  level  annual  contribution  rate  for  a  2O-year  limited  payment  insurance  of  1 
would  be,  for  age  35, 

Benefit  Side  Payment  Side 

7049. 68360 -K424294. 62475 -113737. 21570) 

M35  N35  N55 

As  previously  explained  an  Endowment  Insurance  is  a  combination  of  a  Term 
Insurance  and  a  Pure  Endowment. 

A  Pure  Endowment  contract  is  one  that  promises  to  pay  a  sum  at  the  end  of  a 
given  number  of  years,  or  on  attaining  a  given  age  to  the  survivors  of  those  living 
at  the  date  of  the  contract.  Nothing  is  paid  to  those  who  die  during  the  term  of 
the  contract. 

The  Pure  Endowment  is  the  antithesis  of  the  Term  Insurance.  The  latter  pro- 
vides benefits  to  the  dependants  of  those  who  die  during  the  term.  The  Pure  Endow- 
ment provides  benefits  for  those  who  survive  the  stated  period. 


201 

The  combination  of  the  two  makes  provision  for  the  beneficiaries  of  those  who  die 
and  for  the  survivors  themselves,  and  hence  is  called  Endowment  Insurance. 

The  level  annual  contribution  for  2O-year  Term  Insurance  for  age  35,  as  here- 
tofore shown,  is 

Benefit      Payment 

Side  Side 

(M35-M55)-(N35-N55) 

The  Pure  Endowment  is  paid  to  Survivors,  and  in  this  case  the  Benefit  Side 
is  represented  by  the  Number  Living  at  the  end  of  the  Endowment  Period. 

It  has  been  said  that  Dx  is  derived  from  the  number  living.  The  latter  (lx) 
being  discounted  by  the  present  value  of  $1.00  -to  obtain  the  D  column. 

The  endowment  being  payable  to  the  number  living  at  the  end  of  20  years  from 
age  35,  obviously  this  number  would  be  that  given  in  Table  I  for  age  55,  being  76,534, 
or  lr,.-,. 

The  discounted  value  of  76,534  (lr..-,)  is  that  number  multiplied  by  the  value  of  i 
for  the  year  55,  or  .115656  (represented  by  VM).  And  we  have 

lu  v<«  D55 

76,534  X  .  115656  =  8851  .579  =  Endowment  Benefit. 

The  payment  side  would  be  the  same  for  the  Endowment  as  for  the  Term  Insur- 
ance, because  the  same  persons  make  contributions  during  the  20  years,  and  there- 
fore the  annual  rate  for  the  Pure  Endowment  is 

Benefit      Payment 
Side  Side 

D55     -^  (N35-N55) 

Combining  the  two  formulas  we  have, 

Benefit  Payment 

Side  Side 

(M»-MH)+D«-5-(N«-N») 

which  gives  the  level  annual  contribution  at  age  35  for  a  2O-year  Endowment  Insur- 
ance. 

Anyone  can  make  the  substitution  of  actual  numbers  for  the  symbols  by  entering 
the  M,  D  and  N  columns  opposite  ages  35  and  55,  and  the  answer  then  is  a  simple 
matter  of  subtraction,  addition  and  division. 

The  above  formula  is  made  general  by  expressing  it  in  the  terms  of  any  age  (x). 

Benefit  Payment 

Side  Side 


In  Exhibits  i  and  2  it  was  necessary  to  get  the  total  of  present  values  of  claims 
and  contributions  to  obtain  the  single  premiums  for  insurance  and  annuities  for  a 
term  of  years. 

On  the  margin  are  given  these  totals  for  5,  10,  20  and  35  years  in  order  to  illus- 
trate the  method  of  employing  single  premiums  for  insurance  and  annuities  in  obtain- 
ing annual  premiums. 

By  summing  from  the  oldest  to  the  youngest  age,  and  recording  the  subtotals,  as 
explained  for  the  M  and  X  columns  of  Table  2,  the  total  of  the  C  or  D  column 
for  a  term  of  years  can  be  got  by  taking  the  differences  of  the  M  and  N  columns. 


202 

Thus,  the  sum  of  the  numbers  in  the  C  column  from  age  20  to  24  inclusive  equals 
Man — Mas.  And  the  sum  of  the  numbers  in  the  D  column  for  20  years  from  age  35  is 
equal  to  N«r, — N-,-,. 

This  is  an  illustration  of  the  Short  cuts  possible  by  use  of  the  "Commutation  Col- 
umns," and,  at  the  same  time,  an  explanation  of  the  preceding  formulas  where  the  dif- 
ference of  the  M's  and  N's  appear.  ,  , 

The  level  annual  contribution  for  a  varying  benefit  (increasing  or  decreasing) 
is  also  readily  obtained  by  use  of  the  "Commutation  Columns." 

If  the  benefit  begins  with  $700,  obviously  that  amount  is  promised  through  the 
period  of  protection,  and  hence  is  represented  by  700  times  M;(3.  Being  increased 
$100  at  the  end  of  the  first  year  that  amount  runs  through  the  period  of  protection 
from  age  36  and  is  represented  by  TOO  times  M3e.  Being  again  increased  by  $100  at  the 
end  of  the  second  year  that  amount  runs  through  the  period  of  the  protection  from  age 
37  and  is  represented  by  100  times  M37.  Being  increased  by  $100  at  the  end  of  the 
third  year  that  amount  runs  through  the  period  of  the  protection  from  age  38  and  is 
represented  by  100  times  M38.  The  benefit  is  $1,000  after  the  third  year,  and  we  have 

700M35+100M36+100M37-|-100M38=The  Benefit  Side, 

And  this  corresponds  with  the  illustration,  made  by  use  of  Exhibit  I,  modified 
by  multiplying  the  number  living  by  700,  800,  900  and  1,000  to  find  the  amount  of 
yearly  claims,  and  then  getting  their  present  values.  Obviously  the  same  final 
results  would  have  been  obtained  had  the  number  living  first  been  multiplied  by  the 
present  value  of  I,  and  then  multiplied  by  700,  800,  900  and  1,000,  as  in  the  case  of  the 
multiplication  of  the  numbers  in  the  M  column,  which  latter  represent  the  totals  of 
present  values  of  claims  on  the  basis  of  an  insurance  of  i.  And  it  will  be  remem- 
bered that  the  numbers  in  the  C  column  represent  the  present  values  of  yearly  claims, 
and  that  M  is  the  summation  of  C.  And  that  the  C  column  of  Table  2  corresponds 
to  the  column  of  present  values  of  claims  of  Exhibit  i. 

Varying  rates  of  contribution  also  readily  are  obtained  by  use  of  the  Commutation 
Columns. 

Assume  that  the  protection  is  1,000  for  whole  life  and  that  the  benefit  is  uniform, 
and  taken  at  age  35,  and  that  the  initial  contribution  rate  is  P'  and  is  increased  by 
2  for  three  years  and  then  continues  uniform  for  the  remainder  of  life — being  the 
same  assumptions  as  for  the  varying  rate  in  the  preceding  explanation  for  its  computa- 
tion, by  reference  to  Exhibits  i  and  2. 

The  Benefit  Side  =  1000M35. 

The  Payment  Side  =  P'N35+2N36+2N37-f  2N38. 

Remember  that,  at  the  inception  of  the  insurance  contract,  the  Payment  Side  must 
equal  the  Benefit  Side,  then  by  equating  we  have 

1000M35  =  P/N35+2N36+2N37+2N38. 

By  reference  to  the  M  and  N  columns  of  Table  2  (in  the  Appendix)  the  value?, 
of  1,000  Ms.-,,  N.TB,  2Nse,  2NW  and  2N3S  could  be  found,  and  P',  unknown  quantity,  can 
be  determined  from  the  equation  by  transposing,  so  that 

P/N35  =  1000M35-  (2N36+2N37+2N38) 
1000M35-2(N36+N37+N38)     7049683.60-2(400925.92+378594.17-1-357256.75) 


P'35= 


N35  424294.62 

_  7049683. 60-1 136776. 84    25 
424294.62 


203 

In  the  preceding  illustration  where  the  single  premiums  for  annuities  (2Xi  |a,  2X2  |a  and 
2X3 1 a)  were  employed  the  value  of  P'  was  found  to  be  11.19.  With  the  use  of  the  same  number 
of  decimals  the  two  results  would  not  differ  even  to  the  amount  of  1  in  the  second  place  of  deci- 
mals. The  difference  of  .00  is  due  to  a  more  accurate  calculation  in  use  of  the  Commutation 
Columns. 

Increasing  P'  (11.25)  by  2-\-2-\-2  we  have  17.25  as  the  level  annual  rate  after  the 
third  year  to  provide  for  $1,000  whole  life  death  benefit. 

When  the  Commutation  Columns  are  used  the  formulas  at  first  may  appear  for- 
midable, but  a  little  study  and  commonsense  reasoning  will  render  them  easy  of 
comprehension. 

If  one  will  give  a  few  hours  study  to  Exhibits  i,  2,  3,  4,  5  and  6,  which  are 
worked  out  by  arithmetical  processes,  he  will  become  so  well  grounded  in  the  funda- 
mentals that  little  trouble  will  be  experienced  in  comprehending  the  construction  of 
the  "Commutation  Columns,"  especially  when  only  death  rate  and  interest  rate  are  in- 
volved. When  the  sickness  rate  and  the  permanent  total  disability  rate  are  included 
and  combined  with  the  death  and  interest  factors,  then  there  are  such  complications 
that  no  one  other  than  an  experienced  and  capable  actuary  should  essay  to  deal 
with  them. 

It  would  be  beyond  the  scope  of  this  work  to  undertake  any  explanation  of  the 
computations  where  more  than  mortality  and  interest  are  involved,  although  tables 
appear  in  the  appendix  which  give  values  derived  from  combined  death  and  perma- 
nent total  disability  tables. 

In  presenting  the  formulas  for  varying  benefits  and  contributions,  the  M  and  N 
columns  were  employed  thus  for  the  varying  benefit, 

Benefi t  Side  =  700MX  + 1 OOMX  +1 + 1 OOMX  +2 + 1 OOMX  +3 
And  for  the  varying  contribution,  we  had 

Payment  Side  =  P^Nx+2Nx+1-f-2Nx+2+2Nx+3. 

Obviously  if  the  increase  (or  decrease)  covered  many  years  the  formula  would 
become  very  cumbersome.  To  avoid  the  repeated  additions,  there  is  a  summation 
from  the.  oldest  to  the  youngest  age  of  the  M  and  N  columns,  similar  to  the  treatment 
of  the  C  and  D  columns,  heretofore  explained. 

The  subtotals  in  the  summation  of  the  N  column  are  gsiven  in  Table  2  in  the  columns 
designated  SX  =  ZXX. 

The  subtotals  in  the  summation  of  the  M  column  are  given  in  the  column  headed  RX  =  SMX 

By  using  the  R,  the  above  formula  becomes, 

Benefit  Side  =  700Mx-HOO(Rx+1-Rx+4). 

And  in  the  example  for  varying  contribution,  the  formula  would  become  by  use  of  the  S 
Payment  Side  =  PXNX+ 2  (Sx  +1  -  Sx  +4) . 

Here  advantage  is  taken  of  the  Summation  of  M  and  N  to  obtain  their  totals  by 
taking  the  differences  of  the  R  and  S. 

It  is  my  conviction  that  every  officer  of  a  life  insurance  organization  should  be 
able  to  compute  the  contribution  rates  for  the  ordinary  forms  of  insurance  con- 
tracts, and  I  guarantee  that  anyone  can  do  so  after  two  days  of  assiduous  study,  where 
the  explanations  are  made  as  in  this  publication,  free  from  the  ordinary  expressions 
of  the  expert. 


204 

T  do  not  mean  to  be  understood  as  saying  that  officials,  whose  duties  are  admin- 
istrative and  executive,  should  undertake  the  work  of  the  actuary.  Such  a  position 
would  be  as  untenable  as  to  say  that  they  should  do  the  work  of  the  bookkeeper  be- 
cause they  know  the  theory  of  accounting  and  could  make  single  or  double  entries 
and  audit  the  books  to  prove  their  accuracy. 

Every  man  who  understands  the  system  of  bookkeeping  is  not  a  bookkeeper;  nor 
every  man  who  understands  discounts,  a  banker  or  money  lender.  Neither  every  offi- 
cial, who  understands  the  principles  of  "life  insurance  and  how  to  compute  contribu- 
tion rates,  need  become  an  actuary. 

I  go  further  and  assert  that  life  insurance  is  of  such  importance  that  every  young 
man  and  woman  should  understand  it  before  they  leave  the  public  schools. 

If  for  no  other  reason,  the  science  of  life  insurance  should  be  taught  in  the 
schools,  because  of  the  mathematical  training  in  the  important  and  everyday  processes 
of  addition,  subtraction,  multiplication  and  division. 

Absolutely  these  four  arithmetical  processes  are  all  the  requisites  for  the  calcu- 
lations for  the  ordinary  forms  of  life  insurance  contracts,  and  only  an  elementary 
knowledge  of  equations  is  necessary  to  evolve  the  formulas  for  use  of  the  commuta- 
tion columns.  And  the  construction  of  the  latter  is  simple,  as  any  reader  of  the 
foregoing  explanations  will  testify. 

In  the  effort  to  make  plain  the  principles  and  practices  of  life  insurance  I  may 
be  violating  the  ethics  of  the  profession,  judging  from  the  following  criticism  of  a 
well  known  actuary:  "I  don't  believe  in  so  far  simplifying  technical  subjects  as  to 
dissipate  entirely  the  professional  nimbus  or  aura  to  which  the  standing  of  the  expert 
in  the  community  is  largely  due.  It  is  not  my  intention  to  uphold  quackery  in  the 
slightest  degree,  but  merely  to  protect  the  public  from  the  danger  of  acquiring  the 
erroneous  opinion  that  the  knowledge  of  the  expert  is  but  little  superior  to  that  of  the 
man  in  the  street." 

Our  second  lesson  will  be  finished  with  the  following  recapitulation,  which  I  com- 
mend to  be  committed  to  memory,  and  having  them  in  mind,  let  there  be  a  rereading, 
beginning  with  the  explanation  of  the  exhibits. 

x  =  A  person  of  attained  age  x. 
vx  =  Present  Value  of  $1.00  for  the  year  of  age  x. 
lx  =  Number  living  at  age  x. 
dx  =  Number  dying  at  age  x. 
lxv*  =  Dx. 
dxv*+1  =  C*. 

Mx  =  SCX  =  Present  Value  of  an  insurance  of  1  at  age  x 
=  Cx+Cx+1+Cx+2+,etc. 


=  Cx+2Cx+1+3Cx+2+,  etc.  = 
NX  =  SDx  =  Present  Value  of  an  annuity  of  1  at  age  x 

=  Dx+Dx+1+Dx+2+,etc. 
Sx  =  SNx 

=  Dx+2Dx+i+3Dx+2+,etc.,  =  22DX. 

The  symbol  S2  denotes  the  "second  summation,"  or  the  "sum  of  the  sum  of  the  function 
under  it." 

The  C,  M  and  R  columns  are  known  as  the  "Insurance  columns,"  because  they 
are  derived  from  the  d  column,  which  latter  represents  the  number  dying;  and  the 
dying  mature  the  claims  for  promised  benefits  or  protection. 

The  D,  N  and  R  columns  are  known  as  the  "Annuity  or  Payment  Columns,"  be- 
cause they  are  derived  from  the  1  column,  which  latter  represents  the  number  living 
and  the  living  make  the  contributions  or  payments  to  provide  for  the  benefit  claims. 


205 

There  is  close  relation  between  the  number  living  and  the  number  dying,  be- 
cause the  latter  are  merely  withdrawals  from  the  former. 

Thus :    At  age  20  there  are  100,000  living.     At  age  21  there  are  99,500  living. 
Assuming  that  death  only  is  the  cause  of  the  decreased  number  at  21, 

then  lOC/OOO  —  99  ^00  must  equal  the  number  dying,  or  ^QQ. 

Then,  instead  of  writing 

d20          v21  CM 

500X.  438834  =  219. 416801 

we  could  write 

I2o  I2i      v      v21  CM 

(100000     99500)  X. 438834 "219.416801 

Performing  the  multiplication,  we  have 

V21120-V21121  =  C20. 

Now,  v21  =  vXv20,  it  being  known  by  any  one  informed  concerning  the  succeeding  present 
values  of  1.00,  that 

1  X  v  =  v1  (or  simply  v) , 

v1Xv  =  v2, 

v2Xv  =  v3,  and  so  on  until 

v20Xv  =  v21,  so  that 

v21  =  v2°Xv,  and 

v21Xl2o  =  vXv20Xl2o,  but 

v20Xl2o  =  D2o,  and 

v21Xl2i  =  D2i,  then  substituting,  we  have 

vD2o— D21  =  C2o,  or,  in  terms  of  x, 

vDx— Dx+i  =  Cx,  and  since  Nx  is  the  summation  of  Dx,  and  Mx  is 

the  summation  of  Cx,  the  identical  relations  continue,  and  we  have  vNx— Nx+l  =  Mz,  and  since 
Sx  is  the  summation  of  Nx,  and  Rx  is  the  summation  of  Mx,  the  identical  relation  is  true  of  the 
second  summation  of  D  and  C,  hence  we  have  vSx— Sx+i  =  Rx,  whence  it  would  be  possible  to 
dispense  with  the  "Insurance  Columns,"  C,  M  and  R  and  obtain  single  and  annual  premiums  to 
provide  for  promised  death  benefits  by  the  employment  of  the  "Annuity  or  Payment  Columns," 
D,  N  and  S. 

To  avoid  confusion  it  should  be  explained  that  English  writers  and  actuaries  and  one  Amer- 
ican writer  whose  "Insurance  Primer"  has  been  used  as  a  text  book  in  some  schools  and  colleges, 
in  giving  the  summation  Dx,  record  the  first  subtotal  in  the  Nx  column  opposite  the  second 
age  from  the  oldest  age,  instead  of  entering  it  opposite  the  oldest  age.  For  example,  taking 
Table  II, 

D98=.  06425  =  N98 
l)97  =.22272 


S=.  28697  =  N97 
The  British  column  for  N  would  have  no  value  for  the  oldest  age,  98;  but 

N97=.  06425 

N96=.  28697.     Therefore 

Nx  =  Dx+1+Dx+2+,  etc.,  instead  of 

Nx  =  Dx-j-Dx+1-|-Dx+2+,  etc.,  as   used   by  the   American 

writers  generally  and  followed  in  this  publication.  The  Acturial  Society  recommend  that  it  be 
written  Nx  so  that  HX  =  NX_1  and  2X  =  SX_;  but  the  closed  N  and  S  have  been  used  in  this 
book. 

Let  it  be  noted  that  the 

American  N98  equals  the  British  N97, 
American  N97  equals  the  British  N66, 
American  N9fi  equals  the  British  N95, 
American  Nx  equals  the  British  Nx_i 


206 

which  latter  is  the  general  expression.     The  equations  to  show  the  connection  between  the 
benefit  and  contribution  columns,  under  the  British  notation  would  be  as  follows: 

Cx  =  vDx-Dx+1, 

Mx  =  vNx_,-Nx, 
Rx=vSx_1-Sx. 

There  would,  of  course,  be  no  change  from  the  American  System  in  the  first  equation,  as  only 
the  recording  of  the  totals  in  the  summation  of  the  D  column  varies  from  the  American  method. 

PRACTICAL  APPLICATION  OF  FORMULAS. 

At  the  outset  I  want  to  admonish  against  an  erroneous  idea  prevailing  very  gen- 
erally, that  different  principles  are  involved  in  the  computation  of  premiums  for 
"old  line"  life  insurance  companies  from  those  required  to  obtain  the  contribution 
rates  for  fraternal  beneficiary  societies. 

For  the  same  benefits  promised  and  under  the  same  conditions  of  contribution, 
the  net  rates  would  be  the  same  for  the  life  company  as  for  the  fraternal  society, 
and  the  same  methods  of  computation  would  be  followed. 

I  have  explained,  in  commenting  on  the  open  assessment  companies  and  the  "Flex- 
ible Premium  System,,"  why  the  fraternal  societies  are  justified  in  adopting  contribu- 
tion rates  that  will  yield  no  anticipated  surplus  above  the  estimated  accumulation  to 
maintain  rates  level  and  uniform,  or  to  provide  for  endowments  or  annuities  at  old 
age. 

The  "old  line"  company  contract  is  "fixed"  as  to  benefit  promised  and  premium 
required — it  is  a  "fixed"  contract. 

The  Fraternal  Beneficiary  Society  contract  is  "flexible"  in  every  respect  of  the 
benefit  promised,  or  the  contribution  required,  or  both.  Either  the  benefit  is  limited 
to  the  amount,  of  one  assessment  not  to  exceed  a  stated  amount,  or  the  contribu- 
tions are  subject  to  change,  or  both  benefit  and  contribution  may  be  altered. 

The  nature  of  the  life  insurance  company  contract  makes  a  surplus  over  reserve 
accumulation  a  necessity  or  demands  annual  redundant  premiums.  Unless  there  is 
special  provision  in  the  way  of  capital  subscription  for  the  surplus,  its  accumulation 
must  be  by  redundant  premium  payments. 

To  obtain  reundant  premiums  either  there  must  be  a  low  interest  or  a  high 
mortality  assumption,  or  both.  That  is  to  say,  the  interest  assumed  to  be  earned 
must  be  lower  than  actually  earned,  or  the  assumed  mortality  must  be  higher  than 
the  actual,  or  both  the  assumed  interest  must  be  lower  and  the  assumed  mortality 
must  be  higher  in  the  computation  of  premiums  than  expected  in  actual  operation. 

The  fraternal  beneficiary  society,  having  the  reserved  right  to  pay  less  than 
stipulated  in  the  contract  or  to  charge  more  than  the  initial  rate  of  contribution,  may 
omit  any  provision  for  a  surplus  over  the  reserve  requirement,  and  may  have  com- 
putations of  interest  and  mortality  assumptions  on  the  basis  of  what  reasonably  may 
be  expected  in  future  actual  operation. 

The  "Safety  Clause"  (the  right  of  extra  assessment)  in  the  society  contract  may 
well  be  considered  as  taking  the  place  of  the  "Buffer  Fund"  of  the  life  company. 

For  a  more  extended  exposition  of  this  subject,  see  discussion  of  the  "Flexible 
Premium  System." 

Let  it  be  impressed  that  the  mathematical  processes  and  the  formulas  and  the 
computations  under  them  are  not  different  when  made  for  a  life  company  than  for  a 
fraternal  beneficiary  society. 

All  that  has  been  or  may  be  written  on  the  methods  for  computing  contribution 
rates  is  of  general  application. 


207 

Any  mortality  table  may  be  substituted  for  that  of  the  National  Fraternal  Congress 
Table  which  has  been  used  in  the  illustrations. 

Any  formula  may  be  applied  to  the  values  derived  from  any  mortality  table  or  to 
the  first  combined  death  and  disability  table — having  in  mind  that  all  formulas  in  this 
book  follow  the  American  notation  and  must  be  modified  to  conform  to  the  British 
or  ether  different  notations. 

Any  one  can  convert  the  following  formulas  by  remembering  that  (x)  or  (x-f  n), 
or  (x — n)  represent  the  age  of  the  person  for  whom  the  value  is  to  be  obtained,  and 
then  enter  the  commutation  columns  accordingly  for  the  numerical  quantities.  When 
the  latter  are  substituted  for  the  symbols  only  the  arithmetical  processes  of  addition, 
subtraction,  multiplication  and  division  are  required  for  the  solution  of  the  problem. 
To  the  curious  it  may  be  stated  that  in  the  original  selecton  of  symbols,  the  letters 
were  the  first  of  significant  words.  Now  they  are  used  for  convenience  without  par- 
ticular reference  to  the  initial  letter  of  any  word. 

Long  before  benefits  were  payable  at  death,  provision  for  the  living  was  made, 
and  the  Government  of  England  granted  pensions  or  annuities  on  the  payment  of 
stipulated  sums  prior  to  the  existence  of  life  insurance  organizations  as  we  now 
have  them. 

The  first  commutation  columns  were  devised  to  facilitate  the  computation  of  annui- 
ties, and,  for  this  purpose,  only  the  D  and  N  columns  were  required. 
The  single  premium  for  a  whole  life  annuity  is  represented  by  ax,  and 
ax=Nx  divided  by     Drf;  hence  N  was  taken  as  the  symbol  because  the  first  letter 
in  the  word  "numerator."    And  D  selected  because  the  first  letter  in  the  word  ''denom- 
inator."    And  when  N  was  summed  resulting  totals  were  designated  S,  because  first 
letter  in  the  word  "sum." 

When  the  commutation  columns  were  extended  to  life  insurance  computations  the 
letter  C  was  selected  for  no  better  reason  than  it  was  next  to  D  in  the  alphabet,  unless 
for  the  reason  that  it  corresponded  to  the  present  value  of  claims,  and  was  taken 
because  the  first  letter  in  that  word.  M  and  R  were  accepted  because  of  their  alpha- 
betical proximity  to  N  and  S.  The  annuity  is  represented  by  a  or  a  because  the  first 
letter  in  "annuity." 

However,  the  system  of  notation  now  recognized  and  employed  by  actuaries  is 
arbitrary  and  must  be  learned  from  the  books.  An  individual  is  at  liberty  to  select 
his  own  symbols  to  give  expression  to  his  values.  This  was  my  case  when  I  prepared 
values  for  permanent  total  disability  benefits.  I  have  given  two  tables  for  combined 
death  and  disability  benefits.  Both  are  from  a  combination  of  the  mortality  assump- 
tion, according  to  the  National  Fraternal  Congress  Table  of  Mortality,  and  disability 
assumption,  according  to  the  Fraternal  Society  Permanent  Total  Disability  Experience. 
The  first  are  the  Tables  originally  prepared  by  me  in  1902,  before  any  other  Actuary 
in  this  country  had  taken  up  a  study  of  the  question.  The  second  are  columns  worked 
out  by  the  formulas  recognized  by  the  Actuarial  Society  of  America  and  the  notation 
is  the  system  promulgated  by  that  Society. 

If  anyone  will  perform  the  arithmetical  calculations  involved  to  obtain  results  in 
dollars  and  cents  from  the  following  formulas,  he  will  be  in  position  to  assert  that  he 
can  compute  contribution  rates  for  numerous  forms  of  insurance  contracts,  wtithoui 
provision  for  expenses. 

Single  Premium  for  Ordinary  Whole  Life  Contract  for  Death  Benefit  only. 


208 

For  the  Annual  Net  Contribution, 
PX  =  MX-NX. 

For  the  Monthly  Net  Contribution, 
Pi2  =  M^2-M2N£2 

For  the  Single  Premium  for  a  Whole  Life  Annuity  payable  annually,  with  the  first 
payment  at  once, 

ax  =  Nx-i-Dx. 

For  the  same  with  the  annuity  payable  monthly, 
ax2  =  Nx2-rD" 

Single  premium  for  a  Deferred  Whole  Life  Annuity  payable  annually, 
|a   _  xj         •  D 

n|«x  —  i>lx_j-n~  LJx* 

and  payable  monthly, 


For  an  annual  contribution  to  provide  for  the  Annuity  to  begin  at  age  (x+n),  Pre 
mium  and  Annuity  payable  monthly, 

p   ai2_Ni2     ^_i2(N12  —  N12     ^ 
rn  ax  -  IN  x  +n  •  I^IM  x     IN  x  +J  • 

For  the  Single  Premium  for  a  Temporary  Annuity, 
|  nax  or  a^  =  Nx  -  Nx  +n  -i-  Dx. 

For  the  same  with  the  Annuity  payable  monthly, 


The  Single  Premium  for  Temporary  Insurance, 
nAx  or  A£-,=  (Mx-Mx+n)-:-Dx. 

The  annual  premium. 

|nPx  or  P^-r  (Mx-Mx+n)  -  (Nx-Nx+n)  . 

Payable  monthly. 

\Jf?  or  P^-  (M»-M',f  J  +  (Nj'-Njy  . 

Single  Premium  Term  to  Age  70, 

|7o_xAx=(Mx-M70)-KNx-N70). 

Monthly  premium  for  same. 


By  substituting  for  "70"  any  other  age,  as  50,  55,  60,  65,  etc.,  the  formula  will  give 
rate  for  Term,  to  Age  50,  55,  60  or  65,  etc. 

I  will  not  burden  the  pages  further  with  formulas  for  monthly  contribution  rates. 
If  monthly  rates  are  desired  make  changes  in  formulas  as  indicated  above,  and  enter 
the  commutation  columns  computed  on  the  monthly  basis.  If  these  are  not  given, 
the  monthly  rate  can  be  obtained  approximately  from  the  formula 

P^2  =  24Px-r-  (24—  ll(Px+d)),  where  d  is  equal  to  1—  v  at  the  rate  of  interest  assumed  in 
the  calculation  of  Px. 


209 

W^en  the  rate  is  4  per  cent,  a  close  approximation  for  the  monthly  contribution 
for  the  whole  life  insurance  for  ages  younger  than  42  is  to  multiply  the  annual  rate  by 
.0875.  After  age  40  or  42  the  resulting  rate  from  using  this  factor  will  be  somewhat 
too  small,  the  deficiency  increasing  for  the  advanced  ages.  By  gradually  increasing  the 
multiplier,  the  approximate  accuracy  can  be  maintained. 

However,  it  is  much  better  to  construct  commutation  columns  on  the  monthly 
basis  for  the  reason  that  approximation  formulas  are  not  readily  adapted  to  monthly 
contributions  for  Term,  Limited  Payment  and  Endowment  Contracts.  The  work  of 
conversion  is  not  great  when  using  the  following  formulas  : 


The  commutation  columns  on  the  monthly  basis  for  the  National  Fraternal  Con- 
gress Table  of  Mortality  and  4  per  cent  interest,  given  in  this  book,  and  originally 
computed  for  another  book,  were  derived  by  very  complicated  formulas,  in  which  I 
take  no  pride. 

However,  the  long  and  tedious  process  taught  a  valuable  lesson,  namely,  that  math- 
ematical and  algebraic  refinements  entail  useless  waste  of  time  when  dealing  with 
vital  statistics  and  the  contingencies  of  living  and  dying. 

Since  1900  I  have  investigated  the  mortality  experience  of  about  100  different  fra- 
ternal beneficiary  societies,  and  have  made  annual  investigations  of  a  score  of  old 
and  large  societies,  to  find  varying  ratios  for  each  Society,  and  for  each  investigation 
of  the  same  Society. 

A  reference  to  the  diagrams  which  graphically  show  the  irregularities  of  death 
rates  from  age  to  age  will  convince  anyone  that  we  deal  with  an  eccentric  value  when 
treating  average  mortality  ratios. 

In  the  early  days  of  my  studies  I  accepted  the  often  repeated  statement  that 
the  death  ratios  amongst  a  large  number  of  persons  were  regular,  and  in  the  unvary- 
ing character  of  their  operation  were  like  unto  the  law  of  gravitation. 

I  am  inclined  to  believe  that  the  man  who  was  responsible  for  that  assertion  had 
no  experience  in  dealing  with  actual  facts,  but  that  he  had  all  of  his  information 
from  books  which  discuss  pretty  theories. 

I  have  no  purpose  to  belittle  the  advantage  of  mortality  tables  and  derived  values. 
They  can  be  handled  as  efficient  tools  for  the  building  of  great  and  successful  life 
insurance  companies  and  societies.  But  the  truth  of  the  case  justifies  the  dissipation 
of  the  prevalent  idea  that  the  mortality  table  is  in  correspondence  with  actual  death 
rate. 

The  mortality  table  is  a  fiction,  corresponding  exactly  with  no  actual  experience,  not 
even  with  that  upon  which  it  is  based.  Observe  "graded"  mortality  ratios  in  compari- 
son with  the  irregular  ones  in  actual  experience  as  represented  in  the  graphic  illustra- 
tions heretofore  given. 

The  facts  do  not  support  the  theory  of  refinements  in  mathematical  calculations 
which  have  been  presented  in  many  publications.  The  main  point  is  to  be  sure  and 
get  on  the  side  of  safety,  since  a  few  cents  added  to  the  rate  will  do  no  harm  and 
may  prevent  readjustment. 

Twenty  years  of  activity  in  the  effort  to  help  the  fraternal  societies  out  of  trouble 
have  taught  many  lessons,  and  one  of  the  most  valuable  to  me  is  that  a  knowledge 
of  the  facts  in  a  case  is  of  more  importance  than  anything  else  in  deciding  upon  the 
best  plan  of  business  conduct. 


Theory  as  a  generalization  of  principles  on  which  practice  proceeds  is  most  excel- 
lent 'as  a  mean  toward  a  positive  end.  But  the  results  of  actual  and  practical  opera- 
tion modify  and  should  control  theory. 

Theory  and  practice  in  their  relation  to  each  other  may  be  likened  to  the  science 
of  composition  as  distinguished  from  the  art  of  execution  in  music. 

Theories  and  refinements  in  mathematical  computations  are  indispensable  assets  for 
an  actuary,  nevertheless,  they  are  almost  worthless  if  the  possessor  has  not  the  expe- 
rience to  make  commonsense  application  of  them  in  actual  practice. 

With  the(  opportunity  for  observation  covering  thirty-five  years  of  business  con- 
tact I  have  found  that  intelligent  men  receive  the  best  part  of  their  education  after 
leazring  institutions  of  learning.  It  is  original  thought  that  counts,  and  it  cannot  be 
acquired  from  books,  however  useful  (and  they  are  extremely  useful)  books  and 
schools  are,  as  aids. 

This  diversion  was  due  to  the  reflection  upon  the  computations  of  the  N12  and  M1' 
columns  in  the  year  that  the  National  Fraternal  Congress  formally  ratified  the  mor- 
tality table  which  bears  its  name.  I  can  give  no  better  example  to  sustain  my  com- 
ment than  an  explanation  of  the  method  adopted  in  that  instance. 

To  get  Nxx2,  Dzx2  was  first  obtained,  thus  : 

Assuming  an  even  distribution  of  deaths  occurring  in  a  year,  if  there  are  lx  persons 
living  at  the  beginning  of  a  year,  and  if  dx  die  during  the  year,  the  deaths  each 
month  will  be  represented  by  dx  divided  by  12. 

The  first  instalment  of  the  (annual  premiums  will  be  paid  by  lx  persons  ;  the  sec- 
ond by  lx—  (dsH-12);  the  third  by  lx  —  (2dx-i-i2)  ;  .  .  .  and  the  twelfth  by 


Furthermore,  at  the  end  of  the  year,  the  first  instalment  will  amount  to  (l-f-i)X(lx-r-12),  i 
being  the  rate  of  interest.  Thesecond  instalment  will  amount  to  (l+(lli-r-12))  x(lx—  (dx^ 
12))  divided  by  12.  The  third  instalment  will  amount  to  (l+(10i-^12))  X  (lx-(2dx-7-12)) 
divided  by  12;  ••  -and  the  twelfth  will  amount  to(l+(i-f-12))x  (lx-(lldx-r-  12))  divided  by 
12. 

The  sum  of  these  amounts  is 


12  12 

11+2.1-1-3.9+4.8+  +10.2+11.. 


To  obtain  the  final  term  it  was  necessary  to  change  286i  to  288i,  but  the  consequent 
error  is  insignificant. 

To  get  Drx2  the  foregoing  expression  was  multiplied  by  vx+1,  since  it  represents  the 
value  of  the  instalments  at  the  end  of  the  year.  NX2=SDX2. 

The  Mx2  column  has  nothing  to  do  with  the  monthly  payment  of  premiums,  but 
it  was  constructed  on  the  assumption  that  the  death  claims  are  to  be  paid  within  a 
month  of  approval — which  is  the  general  practice. 

If  claims  equal  to  dx-i-l2  are  to  be  paid  at  the  end  of  the  first  month,  the  equivalent  sum 
of  money  at  the  end  of  the  year,  will  be  (l-f(lli-rl2))  X(dx-M2).  For  the  second  month'3 

claims  the  equivalent  will  be  (l+(lOi^!2))  X(dx-J-12).  and  for  the  twelfth  month 

it  will  be  dx-7-12. 


211 
The  sum  of  the  instalments  is, 


This  expression  multiplied  by  vx+1  will  give  C1*.      M 

The  values   obtained  by  the  complicated   formulas   are  substantially  the   same  as   se- 
cured from  the  approximation  formulas  first  given. 
Annual  Premium  for  Limited  Payment, 

nPx  =  Mx-KNx-Nx+n). 
Annual  Premium  for  Endowment  Insurance, 

PxH  =  (Mx-Mx+n+Dx+n)-=-(Nx-Nx+n). 
Single  Premium  for  Endowment  Insurance, 


Annual  Premium  for  $1,000  of  Insurance  payable  at  death  prior  to  age  70,  or  payable 
at  age  70  in  10  equal  annual  instalments,  first  payment  at  age  70;  contributions  cease  at 
70.  If  insured  dies  before  instalments  are  paid  the  balance  of  $1,000  is  paid  in  one 
sum  to  beneficiaries. 

lOOOPE^^I  =  1000Mx+100(N70-N8o)  -  100(R70-R8o)  -^NX-N70  =  1000Mx-hlOOJ(S70-S8o) 

-r-Nx-N70. 

If  contributions  are  to  continue  during  the  payment  of  instalments  or  until  death, 
the  denominator  would  be 

N  —  Nso. 

Another  formula  is  to  treat  the  present  value  of  the  instalments  at  70  as  an 
endowment. 


And 

I  =  1000(MX-M70)+875D70^DX. 


Annual  Premium  for  $1,000  at  death  prior  to  70,  or  an  annuity  for  life  of  $100,  first 
payment  at  70.    Contributions  cease  at  70. 

|7o-xPx=1000(Mx-M7o)+100N704-Nx-N7o. 

Single  Premium  for  a  death  benefit  of  I  in  the  first  year  and  increasing  by  I  until 
death 

(IA)x=Rx-=-Dx. 

The  Annual  Premium 

(IP)x=R*-Nx. 

Annual   Premium   for  whole  life   insurance,  all  premiums   paid   to   be   returned   in 
addition  to  the  sum  insuranced. 

PX  =  MX-(NX-RX). 

Annual  Premium  for  whole  life  insurance,  all  premiums  paid  to  be  returned  with 
simple  interest  at  the  rate  i  with  the  sum  insured, 


Annual  Premium  for  death  benefit  in  the  first  year  of  $1,000  less  the  amount  of 
the  premium  multiplied  by  the  years  of  "Expectancy,"  and  increasing  for  each  subse- 
quent year  by  the  amount  of  the  premium  to  the  end  of  "Expectancy," 

Px=1000Mx--(NJt+exMx-(Rx+l-Rx,1+eJ). 


212 

Annual  Premium  for  a  life  annuity  of  i  beginning  at  age  70,  no  benefit  payable  in 
event  of  prior  death. 


Annual  Premium  for  an  insurance  of  i  at  death,  with  an  annual  reduction  in  the 
contributions  by  the  twentieth  part  of  the  first  payment,  so  that  the  contributions  dimin- 
ish each  year  and  cease  after  twenty  payments. 


My  original  purpose  was  to  incorporate  amongst  the  formulas  one  for  each  society, 
but  to  date  only  sixty-six  have  sent  their  laws  and  constitutions,  and  half  of  that 
number  announce  contemplated  changes  of  material  or  minor  importance,  while  up- 
wards of  one  hundred  give  as  the  reason  for  not  sending  their  laws  that  a  new 
edition  soon  will  be  necessary  on  account  of  probable  changes  to  meet  conditions 
which  are  expected  to  develop  under  the  operation  of  the  valuation  laws.  In  these 
circumstances  the  original  purpose  had  to  be  abandoned.  However,  I  have  under- 
taken to  give  a  sufficient  number  of  formulas  to  enable  the  student  to  apply  the  com- 
mutation columns  in  any  ordinary  case.  For  the  postage  I  will  pass  upon  any  special 
formula  submitted  by  a  subscriber  to  this  book. 

A  NOVEL  PLAN.  Recently  a  very  novel  plan  has  come  into  prominence  from  the  activity  of 
its  originator,  The  Heralds  of  Liberty,  of  Huntsville,  Alabama,  with  executive  offices  in  Phila- 
delphia. Because  it  is  unique  and  very  much  out  of  the  ordinary,  the  plan  is  being  severely 
criticised  by  insurance  agents  and  journals,  and  by  some  Insurance  Commissioners.  Some  go 
so  far  as  to  characterize  it  as  a  gambling  scheme,  because  the  member  holding  the  lowest  num- 
bered certificate  in  his  class  may  elect  to  surrender  his  certificate  for  cancellation  in  considera- 
tion of  a  cash  payment,  the  election  being  granted  at  the  death  of  a  member  of  his  class.  In 
brief,  $500  is  made  the  unit  of  protection  payable  to  beneficiaries  at  the  death  of  the  member,  or 
a  similar  amount  to  the  holder  of  the  lowest  numbered  certificate  on  the  death  of  a  member  who 
entered  the  Society  at  the  same  age  and  was  in  the  same  "Class"  with  the  holder  of  such  certifi- 
cate. Originally  an  Old  Age  Double  Endowment  was  promised  on  attaining  to  a  stated  age 
above  70. 

No  objection  can  be  raised  to  the  promise  to  pay  the  death  benefit,  nor  to  the  former  promise 
to  pay  an  old  age  benefit. 

The  payment  to  a  living  member  at  the  death  of  an  associate  member  is  the  cause  of  the  ad- 
verse criticism. 

The  members  are  placed  in  "Divisions"  and  "Classes."  A  "Division"  is  composed  of  not 
exceeding  1000  persons  of  all  ages  at  entry  within  the  admission  ages.  A  "Class"  is  composed 
of  the  members  of  a  "Division"  who  entered  at  the  same  age.  Each  member  of  a  "Class"  is 
given  a  number  and  at  the  death  of  one  of  the  "Class,"  the  Society  will  pay  $500  to  the  bene- 
ficiary of  the  deceased  member  and  $500  to  the  member  of  the  same  "Class"  and  "Division" 
who  holds  the  lowest  numbered  certificate. 

It  is  charged  that  the  payment  to  the  living  member  is  a  "gamble,"  or  "lottery." 

To  the  extent  that  life  insurance  is  based  upon  the  chances  of  living  or  dying,  the  life  insur- 
ance business  is  a  "gamble,"  or  "lottery."  To  no  greater  extent  is  the  payment  of  a  sum  of 
money  to  a  surviving  member  on  the  death  of  an  associate  member.  Survivorship  insurance 
is  too  old  and  too  well  established  and  too  favorably  known  to  be  characterized  as  a  "gamble." 

It  is  argued  that  in  ordinary  survivorship  insurance  the  parties  as  insured  or  beneficiaries 
are  named  in  the  contract,  which  is  contained  in  one  policy;  but  in  this  case  each  member  holds 
a  separate  certificate  and  a  payment  is  promised  to  Number  1  in  the  event  of  the  death  of  Number 
2,  or  Number  10,  or  Number  20,  or  any  other  numbered  person  in  his  "Class." 


213 

The  fact  is  ignored  that  the  identification  in  advance  of  death  is  immaterial  in  the  treatment 
of  the  probabilities  involved.  The  death  of  some  member  of  the  "Class"  is  the  event  that  fixes 
the  time  of  payment,  and  it  is  wholly  immaterial  whether  the  amount  be  $1000  payable  in  one 
sum  or  in  two  sums  of  $500  each,  if  provision  has  been  made  for  the  total  payment. 

In  the  text  books  we  learn  of  joint  life  probabilities  concerning  persons  designated  u,  v,  x,  y 
and  z.  Where  is  the  difference  in  calling  them  1,  2,  3,  4  and  5? 

It  is  perfectly  orthodox  to  promise  something  to  u  in  the  event  of  the  death  of  v,  or  of  x,  or 
of  y,  or  of  z.  Why  a  "gamble"  to  promise  something  to  1  in  the  event  of  the  death  of  2,  or  of  3, 
or  of  4,  or  of  5? 

"But  the  latter  are  not  named  in  the  same  policy  contract,"  is  a  reply. 

But  if  they  are  recorded  upon  the  books  of  the  Society,  definitely  associating  them  in  mutual 
cooperation,  and  specifically  setting  them  into  a  designated  "Class,"  limited  to  a  given  number, 
and  each  furnished  with  a  certificate  reciting  the  conditions  of  insurance,  and  all  are  subject  to 
the  same  probabilities  and  the  Society  to  the  same  liabilities  as  if  covered  in  a  single  policy  con- 
tract, wherein  is  there  any  "gamble?" 

Every  reputable  and  informed  actuary  will  admit  that  contribution  rates  can  be  computed 
for  the  payment  to  the  holder  of  the  lowest  numbered  certificate  (or  for  that  matter  to  the  holder 
of  any  numbered  certificate  in  the  "Class")  upon  the  death  of  any  member  of  the  "Class."  And 
the  rates  can  be  computed  upon  the  basis  of  any  ordinary  mortality  table  for  single  lives,  or  with 
the  aid  of  a  table  for  joint  lives.  This  fact  takes  the  case  from  amongst  those  to  be  characterized 
as  "lotteries,"  or  "gambles,"  or  "frauds." 

The  formula  for  the  benefits  stated  is  one  of  the  simplest  in  form,  when  employing  Joint  Life 
Commutation  Columns. 

500Mxx-r-Nxx  =  Annual  Premium,  which  provides  $500  to  the  beneficiaries  of  the  deceased  and 
$500  to  the  surviving  member  of  the  same  "Class"  holding  the  lowest  numbered  certificate.  (It 
could  as  easily  be  the  highest  numbered,  or  the  next  serial  number  to  that  of  the  deceased.)  If 
the  Single  Life  Columns  are  employed  we  have 

Px  =  1000  (Mx-Mx+n)-KNx-Nx+n),  where  21x+n=lx. 

The  two  formulas  are  substantially  equivalent.  I  give  the  rates  for  two  equal  lives  in  the 
appendix,  derived  from  the  "Makehamized"  N.  F.  C.  Table  for  Joint  Lives.  Using  the  same  Table 
for  Single  Lives,  rates  by  the  last  formula  may  be  obtained  for  comparison.  For  the  following 
ages  the  net  annual  premiums  are  as  follows,  on  basis  of, 

Ages.  Joint  Life.  Single  Life. 

20  $  8.15  $  8.09 

30  10.65  10.53 

40  15.08  14.76 

50  23.28  22.50 

60  39.28  38.15 

From  an  actuarial  standpoint,  the  formulas  for  contribution  rates  to  provide  for  the  benefits 
of  many  societies  would  be  very  interesting,  and  I  have  been  tempted  to  give  the  most  unusual. 
However,  for  the  reason  that  many  changes  are  contemplated,  and  because  no  question  has  been 
raised  concerning  the  benefits  by  Insurance  Departments,  I  have  not  multiplied  examples.  The 
Heralds  of  Liberty,  with  their  copyrighted  plan,  have  brought  about  an  especially  interesting 
question  which  justifies  the  foregoing  analysis. 

To  avoid  confusion  from  similarity  I  give  the  following  expressions  together : 

nPx  =  Annual  Premium  for  Limited  Payment. 
n  |  Px  =  Annual  Premium  for  Deferred  Insurance. 
I  nPx  =  Annual  Premium  for  Temporary  Insurance, 
Or  P— |  =  Annual  Premium  for  Temporary  Insurance. 
P— I  =  Annual  Premium  for  Pure  Endowment. 
P~i  =  Annual  Premium  for  Endowment  Insurance. 


214 

As  heretofore  stated,  the  notation  for  the  first  Death  and  Disability  tables  (see 
Appendix)  was  my  own,  because  it  was  the  first  American  production  of  its  kind.  I 
supplied  other  actuaries  with  the  statistics  and  other  tables  have  been  constructed,  and 
recently  the  Actuarial  Society  of  America  adopted  a  system  of  notation  which  follows. 
I  have  prepared  a  second  series  of  Death  and  Disability  values,  which  appear  for  the 
first  time  in  this  book.  I  also  regraded  the  National  Fraternal  Congress  Table  of 
Mortality  by  the  Makeham  formula  to  facilitate  the  computation  of  contribution  rates 
for  joint  lives.  That  table  and  derived  values  appear  in  the  Appendix. 

DISABILITY  SYMBOLS. 
laa  =  the  number  of  active  lives  at  age  x. 
lx    =  the  number  of  invalid  lives  at  age  x, 

then  lxa+lx  =  lx. 

lx  =the  survivors  at  age  x  in  a  mortality  table  based  on  invalid  lives  (not  to  be  confused 
with  lx  amongst  whom  there  are  additions  each  year  from  those  just  disabled). 

daa  =  the  number  dying  as  active  lives  between  ages  x  and  x-fl. 

d^  =the  number  dying  as  invalid  lives  between  ages  x  and  x-f-1  =lx+ix~lx   r 

ix    =the  number  of  active  lives  becoming  invalid  between  ages  x  and  x+1. 

Px  =  the  probability  of  an  active  life  aged  x  being  alive  one  year  hence,  whether  then  act- 
ive or  invalid. 

qx  =the  probability  of  an  active  life  aged  x  dying  within  a  year,  whether  still  active  or  after 
becoming  invalid, 

then  Px+qx  =  1- 

px  =the  probability  of  an  invalid  life  aged  x  being  alive  one  year  hence. 

qx  =  the  probability  of  an  invalid  life  aged  x  dying  within  a  year, 

then  px+qx=l- 

paa  =  the  probability  of  an  active  life  aged  x  being  alive  and  active  one  year  hence. 
pai  =the  probability  of  an  active  life  aged  x  being  alive  but  invalid  one  year  hence. 
qaa  =  the  probability  of  an  active  life  aged  x  dying  while  still  active  within  a  year. 
qai  =the  probability  of  an  active  life  aged  x  becoming  invalid  and  dying  within  a  year. 

rx    =the  probability  of  an  active  life  aged  x  becoming  invalid  within  a  year, 

,1  aa  i     ai        a          aa  i     ai        a         ai  i     ai  aa  i     aa      i  aa  i     ai  _j_    aa  i     ai      •, 

then  px  +px  =px;     qx  +qx  =qx;    px  +qx  =  rx;    Px  +qx  =    -rx;     Px  +Px  +qx  +qx  =1. 

rx  ='the  absolute  annual  rate  of  invalidity, 

xu        '  ix 

t*enr,i"^-* 


rVi          xiii 

Dv  =v  lv 


Nx  = 


215 

o^1  =  value  of  an  annuity  payable  at  the  end  of  each  year  provided  an  active  life  now  aged 

x  is  then  alive  but  invalid. 

a^   =  value  of  an  annuitynlue  on  an  active  life  payable  during  survival,  active  or  invalid. 
a*a  =  value  of  an  annuity-due  on  an  active  life  payable  during  activity, 
a^    =  value  of  an  annuity -due  on  an  invalid  life. 

JaJly  )  =  value  of  a  deferred  temporary  annuity  payable  at  the  beginning  of  each  of  t 
years  deferred  n  years,  pVovided  the  disability  occur  during  the  n  years. 

axaTn[  :y^x"|  =  value  of  an  annuity-due  on  an  active  life  for  n  years  or  for  y  —  x  years,  which- 
ever is  the  shorter,  during  activity. 

FORMULAS  FOR  RESERVES.  Another  commonly  used  method  for  determining  the 
reserve  at  any  age  is  by  actual  accumulation  of  premium  receipts,  less  death  losses. 
Thus,  lx  persons  insured  at  age  x  each  pay  Px  dollars  annually  in  advance.  The  total 
payments  for  the  first  year  are,  therefore,  lxXPx- 

This  sum  accumulates  interest  at  the  annual  rate  of  i,  and  amounts,  at  the  end  of  the  year, 
to  lxPxX(l+i).  The  death  losses  payable  at  the  end  of  the  year  equal  dx  dollars.  Subtracting 
these  losses,  we  have  left  lxP*(l+i)  —  dx.  This  remainder  belongs  to  the  survivors,  who  num- 
ber lx— dx,  or  Ix+i;  therefore,  the  share  of  each  is 

— -       —     Multiplying  both  numerator  and  denominator  by  vx+1,  and  remembering 


that  l+i  =  — ,  we  obtain — 


lxv*Px-yX+'dx 


D  C 

If,  now,  we  represent   ~         by  ux,  and  n        by  kx,  the  expression  becomes  Pxux— kx, 

which  is  the  reserve  to  the  credit  of  each  survivor  at  the  end  of  the  first  year.  To  find  the 
reserve  at  the  end  of  the  second  year,  add  Px,  the  second  annual  premium,  and  proceed  as  before, 
using  ux+i,  and  kx+i  in  place  of  ux  and  kx.  By  continuing  the  process,  the  reserve  at  the  end  of 
any  specified  year  may  be  ascertained.  This  is  known  as  the  retrospective  method. 

A  simple  formula  for  obtaining  the  reserve  on  a  continuous  level  annual  premium 
for  Whole  Life  Insurance  is : 


az 

The  required  reserve  accumulation  on  Endowment  and  Term  Insurance  is  obtained 
by  use  of  Temporary  Annuities  in_  a  similar  way  as  above  indicated  for  the  use  of 
Whole  Life  Annuities  in  Whole  Life  Insurance. 

The  prospective  and  retrospective  methods  will  bring  out  identical  results  under 
the  same  assumptions  of  death  rate  and  interest  rate — otherwise  not.  The  retrospec- 
tive formula  is : 

y  _Px(Nx-Nx+n)-(Mx-Mx+n) 
Dx+n 

(Nx—  Nx+n)-i-Dx4.n  =  nUx,  which  multiplied  by  the  protection  by  Px,  gives  the  accumulated 
contributions.  (Mx-Mx+n)-j-Dx+n  =  nKx,  which  multiplied  by  the  protection  gives  the  ac- 
cumulated claims.  The  difference  is  the  accumulated  reserve. 

In  the  following  illustrations  are  shown  the  practical  workings  of  three  methods 
of  computing  reserves.  Nos.  i  and  2  are  applicable  to  any  level  premium  contract 


216 


of  insurance.  No.  3,  which  is  more  rapid  than  either  of  the  others,  is,  unfortunately, 
limited  to  whole  life  insurance,  with  continuous  annual  premiums,  being,  in  fact,  a 
special  case  of  No.  2..  All  three  illustrations  are  based  on  the  National  Fraternal 
Congress  Mortality  Table  and  four  per  cent  interest,  and  the  same  entry  age  is 
assumed  in  each,  so  that  the  results  may  be  compared  with  one  another,  and  with 
the  table  of  reserves  in  the  appendix  and  "Friendly  Societies  and  Fraternal  Orders." 
In  No.  3,  the  reserves  obtained  are  on  an  assurance  of  one  dollar,  and  should,  there- 
fore, be  multiplied  by  1,000  before  comparison  is  instituted.  When  extensive  reserve 
tables  are  to  be  computed  by  the  methods  of  Nos.  2,  or  3,  the  work  will  be  greatly 
facilitated  by  the  preliminary  tabulation  of  Ax+i  — Ax  in  the  former  case,  and  of  ax— ax+i 
in  either  case.  Reserve  at  end  of  years  is  printed  in  italic  figures. 


No.  1. 

P2o=  ...........................  10.34 

1120=  ...........................  1.0452 

P2oXu2o=  ......................  10.807 

kM=  ...........................  5.025 

iV2o  =  (P20Xu2o)-k20=  ...........  5.78 

?-«,=  .........  ..................  10.34 

iV^+P^  ......................  16.12 

u21=  ...........................  1.0453 

(iV20+P20)Xu21=  ................  16.850 

k21=  ...........................  5.061 

2V20=(iV20+P2o)Xu21-k21=  ......  11.79 

No.  2. 
AM=  .............  .......  211.86 

A21=  ....................  216.42 


a20=  .....................  20.492 

a21=  .....................  20.373 

a20-a21=  ..................  119 

P2o=  .....................  10.34 


iV2o  =  A2l-A20+P2o(a2o-a21)=  ..... 

A22-A21=  ...................... 

a21-a22=  ..................  123 

P2o(a2i-a22)  =  ................... 

2V2o=iV2o+A22-A21+P20(a21-a22)  = 
A23-A22=  ...................... 

a23-a21  =  ..................  128 

P2o(a22-a21)  =  ................... 

3V20  =  2V2o+A23-A22+P2o(a22-a23)  = 


4.56 


1.23 

5.79 
4.73 

1.27 


4.92 

1.32 

18.03 


No.  2 — Continued. 

Pa)= 10.34 

2V2o+P20= 22.13 

u22= 1.0453 

GVa+Pa))  Xu22 23 . 133 

k22= 5.097 

3V2o=(2V2o+P20)Xu22-k22= 18.04 

PM= 10.34 

3V20+P20= 28.38 

u23= 1.0453 

(3V20+P20)Xu23= 29.666 

k23= 5.133 

4V20=(3V2o+P2o)Xu23-k23= 24.53 

No.  3. 

a2o= 20.492   Multi- 

aa= 20.373    ply  by 

a20-a21= 119    1,000 

iV»=  (*»— an)  -J-a2<>  = 00581 

a21-a22= 123 

(a2i-a22)-j-a2o  = 00600 

a22-a23= ". i28 

(a22-a23)^-a2o= 00625 

sV2o  =  2V20+(a22— a23)-:-a2o= 01806 

a28-a24= 133 

.00649 

.02456 


a24-a25= 
(a24  — 


138 


.00673 
.03128 


AN  EXAMPLE. 

The  foregoing  formulas  were  made  from  the  benefits  actually  promised  by  com- 
panies and  by  societies.  The  last  one  now  given  will  show  how  differently  different 
persons  will  prepare  formulas  from  a  different  view  point  of  identical  provisions  in 
the  certificate  contract. 

The  society  in  question  promised  to  pay  $1,000  at  death  prior  to  age  70  and  attain- 
ing to  age  70  promised  a  payment  of  $50,  and  at  the  beginning  of  each  subsequent 
year  for  9  years  to  pay  a  similar  amount;  that  is,  would  pay  $50  on  attaining  age  71, 
$50  on  attaining  age  72,  73,  74,  75,  76,  77,  78  and  79,  being  a  total  of  endowments  or 
annuity  payments  of  $500  in  ten  equal  annual  instalments.  Premium  payments  would 
continue  until  death,  and  were  not  altered  on  account  of  the  decrease  in  the  amount 


217 

of  protection,  due  to  the  payment  of  the  $50  annuities  at  and  after  age  70.  The  $500 
of  protection  against  death  was  continued  after  the  annuity  payments  were  discon- 
tinued. Since  the  contributions  were  to  be  made  unaltered  at  the  level  rate  as  of  age 
of  entry  until  death;  therefore,  as  seen  from  former  formulas,  the  denominator  in 
this  case  would  be  N«.  The  numerator,  or  the  benefit  side  of  the  contract,  would  be 
a  straight  $1,000  death  benefit  to  age  70,  and  then  decreasing  the  death  benefit  by  $50 
for  each  year  to  age  79  inclusive,  and  then  continuing  $500  death  benefit  from  79  to 
the  end  of  life.  i,oooMx  will  represent  the  benefit  side  to  age  70.  From  70  the  death 
benefit  will  decrease  $50  a  year.  According  to  former  illustrations  we  must  use  the 
R  column  for  the  decreasing  protection,  and  we  would  have,  beginning  the  reduction 
at  70,  50  (R70— RSO).  In  the  place  of  the  decreasing  amount  of  death  benefit  there  is  an  annuity 
of  $50,  and,  according  to  former  illustrations,  the  annuity  would  be  represented  by  the  N  col- 
umn, so  that  we  would  have  a  payment  of  $50  each  year,  and  hence  we  would  have  $50  (N70— NSO)  ; 
therefore  the  complete  enumerator  would  be  1,OOOMX— 50(R70— Rso)-f 50(N70— NSO)  for  the 
straight  life  and  decreasing  temporary  insurance,  and  for  the  instalment  of  $50  annually  from 
70  to  79  inclusive.  These  instalment  endowments  are  of  the  nature  of  a  deferred  temporary 
annuity.  We  have  seen  that  R  can  be  written  in  the  terms  of  S,  and  when  substituted  in  the 
above  numerator  we  would  have  R70  =  vS70— S7i  and  R8o  =  vS8o— S8i,  whence  1,OOOMX— 50(R70— 
R8o)-r-50(N7o-N8o)  =  l,OOOMx-50(vS7o-S7i-vS8o-S8i-N7o+N8o),  but  asSx  is  equal  to  Sx+i 
-|-Nx,  whence  the  last  expression  =  l,OOOMx-f-50(l— v)(Svo— Sso),  but  as  1— v  equals  d, 
this  becomes  l,OOOMx+50c?  (Syo— Sgo),  which  is  the  formula  that  probably  will  puzzle  the 
operator  who  went  to  the  trouble  of  constructing  the  modified  C  and  the  modified  M  columns  in 
order  to  obtain  the  results  which  are  possible  through  the  use  of  the  last  named  simple  formula. 
It  will  be  appreciated  what  may  be  done  by  the  use  of  the  commutation  columns 
when  it  is  stated  that  the  operator  who  undertook  to  obtain  the  annual  premiums  for 
the  benefits  above  described  modified  the  regular  C  column  (as  given  in  the  appendix 
to  this  book  for  the  National  Fraternal  Congress  Table  of  Mortality)  from  98  to  70 
by  taking  one-half  thereof  for  all  of  the  ages  from  98  to  79,  then  for  age  78  he  took 
eleven-twentieths  of  the  regular  C  column  and  for  77  twelve-twentieths,  and  so  on, 
increasing  one-twentieth  until  and  including  age  70,  where  he  had  nineteenth-twentieths 
of  the  regular  C  column.  For  age  79,  and  all  ages  younger,  the  regular  C  column  was 
used.  By  summing  this  new  C  column  he  secured  a  new  M  column  and  used  it  in 
the  regular  way  for  obtaining  contributions  with  a  decreasing  insurance  from  70  to  80, 
and  with  a  constant  insurance  from  80  to  the  end  of  life. 


AN  ENGLISHMAN'S  CONCLUSION. 

I  shall  conclude  this  chapter  with  a  quotation  from  Thomas  Fatkin,  of  Leeds, 
England,  who  issued  a  62-page  pamphlet  in  1906  in  advocacy  of  teaching  life  insurance 
and  annuity  principles  in  the  public  schools,  and  undertook  to  demonstrate  that  the 
computations  involved  simple  arithmetical  processes,  in  connection  with  a  "preparatory 
table,"  meaning  "commutation  columns  :" 

The  principles  upon  which  hundreds  of  millions  of  pounds  are  financed  in  this 
country  are  only  understood  by  a  few  competent  men,  who  could  probably  be  put  in 
a  single  room  of  a  small  cottage.  How  long  will  the  Board  of  Education  let  this  state 
of  things  continue? 

It  is  probable  that  most  of  the  90,000  teachers  could  explain  the  following  problem 
to  their  pupils  : 


V(H-2V30)     V  (7  -2V  10)     V(8X4V3) 

But,  at  the  same  time,  it  is  very  possible  that  very  few  of  them  could  solve  the  follow- 
ing problem: 


218 

Assuming  that  a  teacher  now  25  years  of  age  desired  to  provide  himself  with  an 
annuity  of  50  pounds,  payable  quarterly,  on  arriving  at  60  years  of  age,  and  in  the 
event  of  death  before  60,  half  the  amount  subscribed  to  be  returned  to  his  representa- 
tives. How  much  per  annum  should  the  teacher  subscribe? 

I  have  shown  that  the  solution  of  such  problems  are  only  simple  arithmetical  opera- 
tions —  with  the  help  of  a  preparatory  table. 

In  the  "Advanced  Course  of  Mathematics  in  the  University  Tutorial  Series,"  a 
work  used  in  our  universities,  and  also  used  in  the  "University  Correspondence  Col- 
lege," for  training  students  for  the  matriculation  examination  of  London  University 
and  for  higher  honors,  there  are  abundance  of  such  problems  as  the  above  "Surd" 
problem. 

I  notice  only  two  problems  in  this  great  and  deservedly  popular  work,  which  treat 
on  two  very  simple  questions  affecting  life  Annuities  and  Assurances.  The  answers 
to  both  problems  appear  to  be  incorrect.  I  will  give  one  of  them,  which  appears  on 
page  275. 

"A  man  aged  54  in  the  receipt  of  a  pension  of  100  pounds  a  year  net,  wishes  to  com- 
mute that  for  a  present  payment,  interest  being  reckoned  at  5  per  cent.  How  much 
does  he  receive  if  his  expectation  of  life  is  17  years?"  The  answer  given  is  1,127.406 
pounds. 

If  the  eminent  mathematical  authors  had  put  the  problem  as  follows:  "A  man 
aged  54,  in  the  receipt  of  a  pension  of  100  pounds  a  year,  certain  for  17  years,  wishes 
to  commute  that  for  a  present  payment,  interest  being  reckoned  at  5  per  cent."  The 
answer  would  be  1,127.4066  pounds,  which  can  be  ascertained  from  tables  published 
above  a  century  ago. 

The  formula  for  the  Annuity  Certain  is  : 

100X(1.0517-1)     n1107,f 
Value  of  Annuity  =      1      17  127.4066, 


a  mere  geometrical  progression  sum. 

The  formula  is  not,  however,  applicable  to  Annuities  on  life,  whatever  may  be  the 
average  number  of  years  "Expectation."  I  allude  to  this  problem  because  I  believe 
that  there  are  a  great  many  arithmeticians,  accountants,  and  financiers  who  fall  into 
the  same  error. 

An  eminent  mathematician  above  70  years  ago  wrote  :  "Many  persons  who  have 
but  an  imperfect  knowledge  of  the  subject  (i.e.,  Annuities)  erroneously  suppose  that 
the  value  of  an  Annuity  payable  during  the  life  of  an  individual  is  found  by  calculat- 
ing the  value  of  an  Annuity  Certain  for  a  number  of  years  equal  to  the  expectation  of 
life  of  the  individual." 

According  to  the  mortality  rate  upon  which  my  calculations  are  made  (i.e.,  the 
mortality  experienced  amongst  members  of  Friendly  Societies  as  ascertained  by  the 
Government  Actuary)  a  man  at  55  has  an  expectation  of  future  life  of  15.904  years. 
If  he  have  a  pension  of  100  pounds  net,  payable  at  the  end  of  each  year,  what  is  the 
commutable  value  of  the  pension  at  2.y2  per  cent  interest? 

,    ,        NM     15646.0662      „ 
Formula  as  before  p-  =  187663.2477  =  £l  L994277 

the  value  of  £1  per  annum  X  100  =  £1199  8s  6.65d. 

Let  any  student  work  out  the  commutable  value  on  the  principle  of  taking  15.904 
years  certain  and  2*4  per  cent  as  the  basis  of  valuation  as  adopted  in  the  mathematical 
work  referred  to  and  he  will  make  the  value  100  pounds  too  much. 

According  to  the  Carlisle  rate  of  mortality,  a  person  at  29  years  of  age  has  an 
expectation  of  just  35  years,  the  commutable  value  of  a  pension  of  100  pounds  at  age 
29  made  upon  a  correct  principle  (Carlisle  2^  per  cent)  is  £2,143  IDS  7d. 

According  to  the  data  I  have  used  in  my  calculations,  Government  Friendly  Societies 
2*4  per  cent,  the  commutable  value  would  be  : 


£2,142  is  od,  a  difference  of  only  £  i  95  7d  as  compared  with  Carlisle  rate  of  mortality. 


219 

If  worked  out  on  erroneous  principles,  i.e.,  adopting  the  35  years'  "expectation" 
as  a  basis,  the  commutable  value  would  be  £2,314  IDS  4d,  or  £172  gs  4d  too  much. 
This  would  be  a  serious  difference  if  a  few  million  pounds  were  invested  in  such  a 
fund. 

How  long  will  the  Board  of  Education  permit  such  simple  formulae  as  those  to 
which  I  have  alluded  to  remain  untaught  in  our  public  schools? 

DEFINITIONS. 

INSURANCE  is  or  should  be  a  provision  for  indemnity  against  loss.  Fire  Insurance 
is  an  indemnity  against  loss  from  fire;  Marine  Insurance  against  loss  by  accident  at 
sea;  accident  Insurance  against  loss  by  accident  either  to  the  person  or  to  property. 
Disability  Insurance,  which  includes  accident  insurance,  is  to  indemnify  against  loss 
of  time,  either  due  to  sickness  or  accident  which  disables  a  person  or  prevents  him 
from  attending  to  his  ordinary  occupation.  Sickness  Insurance  is  to  indemnify 
against  loss  oi  time  by  sickness,  and  is  also  included  under  disability.  Life  Insurance 
is  to  indemnify  against  loss  from  death;  that  is  to  say,  the  bread  winner  upon  whom 
are  dependent  other  persons,  is  of  value  to  them,  and  should  he  die  they  will  sustain 
a  loss  because  of  that  event.  Therefore,  accepting  the  definition  that  insurance  is  to 
indemnify  against  loss,  there  can  be  or  should  be  no  insurance  where  loss  will  not 
result  either  from  accident  or  disease  or  death  or  fire  or  storm  or  other  causes  of 
loss,  as  from  burglary  and  for  theft  and  for  mistakes  of  different  kinds. 

Insurance  has  been  diverted  from  its  proper  channel  by  failure  to  confine  it  to 
indemnifying  against  loss.  It  occurs  to  me  that  personal  insurance  would  be  about 
perfect  if  a  man  were  to  insure  against  loss  from  death  during  the  period  in  which 
he  has  dependants  and  when  he  is  a  support  to  some  one ;  and  during  the  same  period 
he  should  insure  against  the  loss  of  time  through  disability  from  accident  or  sickness, 
and  during  the  same  period,  while  he  is  able  to  earn  not  only  a  living,  but  to  lay 
aside  something,  he  should  contribute  to  a  deferred  pension ;  that  is,  he  should  make 
annual  or  monthly  payments  from  his  youth  to  old  age,  when  there  should  be  a  dis- 
continuance of  the  contributions  and  also  a  discontinuance  of  the  insurance  against 
death  and  of  the  insurance  against  disability,  and  he  should  enter  upon  a  pension  or 
an  annuity,  or  should  have  paid  to  him  one  sum  in  cash  for  investment  and  for  the  pro- 
tection of  himself  in  old  age.  The  trouble  I  have  found  in  putting  such  a  plan  into 
operation  is  the  desire  on  the  part  of  Americans  to  have  large  amounts  in  the  way 
of  annuities  or  in  the  way  of  disability  benefits.  To  give  the  amount  of  death  benefit, 
and  the  amount  of  disability  benefit  desired  by  the  ordinary  workingman,  when  it 
comes  to  considering  a  contract  of  this  character,  and  then  an  amount  sufficient  for 
his  old  age,  as  he  considers  it,  the  rate  of  contribution  would  come  so  high  that  it  is 
beyond  the  ability  of  the  ordinary  workingman  to  pay.  If  a  moderate  amount  of 
insurance  protection  in  the  way  of  death  benefit,  disability  benefit  and  a  pension  for 
old  age  would  satisfy  the  average  American  citizen,  I  should  say  that  this  combined 
protection  would  be  the  most  satisfactory  and  certainly  would  meet  the  needs  of  the 
great  majority  of  people. 

A  POLICY  is  the  contract  written  by  Life  Insurance  Companies. 

A  CERTIFICATE  is  the  contract  written  by  Fraternal  Beneficiary  Societies. 

There  is  a  material  difference  between  a  policy  issued  by  Life  Companies  and  a 
certificate  issued  by  Fraternal  Societies,  due  to  the  fact  that  the  former  is  a  fixed 
contract,  and  cannot  be  avoided  during  its  term  by  the  life  company,  while  the  member 
or  policy-holder  may  discontinue  or  break  his  contract  at  his  option.  A  certificate 
issued  by  the  Fraternal  Societies  is  not  a  fixed  contract,  but  flexible.  While  it  cannot 


220 

be  voided  during  its  term  by  the  Society,  and  while  the  member  may  discontinue  it  or 
break  his  contract  at  option,  yet  there  are  obligations  (while  he  is  a  member)  upon 
the  holder  of  the  certificate  which  is  not  present  in  the  provisions  of  the  policy  of  a 
life  insurance  company. 

Policy  and  certificate  contracts  vary  greatly,  the  same  company  or  the  same  society 
issuing  many  forms  of  policies  or  certificates. 

THE  ORDINARY  WHOLE  LIFE  policy  is  one  which  promises  to  pay  a  death  benefit 
or  a  disability  benefit  at  death,  or  in  the  event  of  disability  whenever  it  may  occur, 
and  the  contributions  continue  until  death. 

THE  LIMITED  PAYMENT  contract  is  one  where  the  contributions  are  limited  either 
to  one  payment  or  to  10  payments  or  15  payments  or  20  payments,  or  as  may  be 
agreed  upon  at  the  issuance  of  the  contract.  The  death  or  disability  benefit  is  for 
the  whole  period  of  life  similar  to  a  benefit  promised  under  an  ordinary  whole  life 
contract.  At  the  date  when  the  contributions  cease — that  is,  at  the  end  of  the  premium- 
paying  period — the  reserve  or  accumulation  on  such  certificates  is  equal  to  the  single 
premium  at  the  age  at  the  end  of  the  premium-paying  period. 

ENDOWMENT  INSURANCE  is  a  contract  promising  to  pay  a  death  and  disability  ben- 
efit within  a  term  of  years,  or  at  the  end  of  the  period  to  pay  an  endowment  or  an 
amount  in  cash  or  the  amount  of  the  certificate  or  policy  by  instalments.  This  is  a 
combination  of  term  insurance  and  pure  endowment  insurance  as  heretofore  explained. 

TERM  INSURANCE  is  temporary  insurance  for  a  designated  term  or  period,  which 
may  be  for  5,  10,  15,  20  or  any  stated  number  of  years,  or  to  a  designated  age,  as  age 
50,  60  or  70. 

RENEWABLE  TERM  INSURANCE  gives  the  privilege  of  renewing  the  insurance  at  the 
end  of  the  given  term,  without  medical  re-examination,  by  contributing  at  an  increase 
contribution  rate  for  the  renewed  term. 

CONVERTIBLE  TERM  INSURANCE  gives  the  privilege  of  converting  or  changing  con- 
tracts without  medical  re-examination,  but  at  increased  contribution.  The  transfer 
should  not  be  granted  to  a  lower  contribution  rate  for  the  same  benefit. 

INSTALMENT  INSURANCE  provides  that  the  benefits  shall  be  paid  by  instalments 
instead  of  one  sum. 

MORTALITY  TABLES  are  the  instruments,  so  to  speak,  which  are  used  in  the  computa- 
tion of  contribution  rates  for  promised  benefits. 

There  are  in  existence  numerous  tables  of  Mortality.  Some  of  these  have  been 
constructed  from  population  statistics,  and  many  of  them  from  life  insurance  statistics. 
The  latter  are  the  ones  in  which  we  are  concerned.  There  was  published  in  1783 
what  is  known  as  the  North  Hampton  Table,  which  was  constructed  by  Dr.  Price 
from  statistics  in  two  parishes  in  the  town  of  North  Hampton.  The  Carlisle  table 
was  published  in  1815,  and  constructed  by  Dr.  Milne  from  the  census  of  the  popula- 
tion of  two  parishes  in  Carlisle  in  1780,  and  the  deaths  in  the  same 
parishes  from  1779  to  1787,  inclusive.  The  population  at  the  beginning  of 
this  period  was  7877,  and  the  deaths  during  the  9  years  1,840.  A  half  a  dozen  Mor- 
tality Tables  have  been  taken  from  the  population  statistics  of  Great  Britain,  espe- 


221 

daily  in  England.  The  original  table  is  known  as  "The  Healthy  English  Table."  It 
was  formed  by  Dr.  Farr  from  the  census  returns  in  1851,  and  the  record  of  the  births 
and  deaths  from  1848  to  1853,  inclusive,  in  63  of  the  healthiest  registration  districts 
of  England  and  Wales.  In  all  of  these  districts  the  mortality  of  the  general  popula- 
tion did  not  exceed  the  rate  of  17  annual  deaths  to  1,000  living,  and  at  the  census  of 
1851  the  total  population  of  these  selected  districts  was  nearly  one  million  persons, 
of  whom  about  493,000  were  males  and  503,000  were  females. 

In  1834  Mr.  Morgan  published  a  table  formed  from  the  experience  of  the  Old 
Equitable  Society.  In  1843  there  was  published  the  experience  of  17  life  insurance 
companies  now  known  as  the  Actuaries  or  the  Combined  Experience  Table.  The 
statistics  from  which  this  experience  was  compiled  embraced  nearly  84,000  policies, 
running  from  1762  to  1833,  of  which  nearly  14,000  were  terminated  by  death.  In  1868 
Mr.  Shepherd  Homans  constructed  and  published  the  American  Experience  Table  of 
Mortality  based  upon  the  Experience  of  the  Mutual  Life  Insurance  Company  of  New 
York.  This  is  the  recognized  standard  mortality  table  of  the  United  States  for  Life 
Insurance  Companies,  although  valuations  are  permitted  upon  basis  of  net  reserves 
derived  from  the  Actuaries  or  the  Combined  Experience  Table.  In  1869  there  was 
published  in  Great  Britain  what  is  known  as  the  "Hm  Table,"  meaning  the  experience 
of  healthy  males.  About  180,000  policies  were  submitted,  n  per  cent  of  which  were 
on  female  lives.  By  excluding  duplicate  policies  and  female  lives,  the  number  was 
reduced  to  140,000  healthy  male  lives.  This  Hm  table  was  used  almost  exclusively 
in  Canada  and  up  to  within  recent  years  was  used  in  Great  Britain  to  the  exclusion 
of  any  other  table,  excepting  for  annuities.  Recently  a  new  table  has  been  published  in 
Great  Britain  covering  British  assured  lives  from  1863  to  1893  and  including  all  of 
the  Life  Insurance  companies  of  that  country.  This  is  known  as  the  Om  Table. 
After  excluding  the  lives  during  the  first  5  years,  there  were  411,340  exposed  to  risk 
for  5,324,862  years.  This  table  has  been  adopted  in  Great  Britain  and  also  by  the 
Canadian  Parliament  in  1907  as  a  standard  for  life  insurance  for  those  countries.  The 
Actuarial  Society  of  America  has  recently  instituted  an  investigation  into  mortality 
as  influenced  by  large  policies  and  by  term  policies  and  the  nationality  of  the  insured 
as  well  as  the  occupation,  residence,  family  history  and  personal  disability.  The 
National  Fraternal  Congress  Table  of  Mortality  has  been  fully  explained.  There  have 
also  been  constructed  permanent  total  disability  tables,  the  first  one  being  constructed 
by  me  in  1902,  and  which  is  given  in  this  book.  Another  and  more  recently  con- 
structed table  was  from  statistics  furnished  by  me  to  Actuaries  who  combined  these 
statistics  with  the  American  Experience  Table.  I  have  used  the  formulas  adopted 
by  the  Actuaries  in  their  construction  of  disability  tables  in  combination  with  the 
American  Experience  Table,  and  give  in  this  book  the  second  table  constructed 
according  to  the  formulas  prescribed  by  the  Actuarial  Society,  or  at  least  which  have 
been  accepted  by  that  body.  The  original  disability  tables  constructed  by  me  are  upon 
simple  lines  as  compared  with  the  complications  of  the  second  table  constructed  accord- 
ing to  the  formulas  first  worked  out  by  an  Actuary  of  Germany,  and  which  has  been 
accepted,  as  stated,  by  the  Actuarial  Society  of  America. 

Of  persons  similarly  selected  within  a  given  period  of  time  out  of  a  given  number 
exposed  to  death  a  larger  number  will  die  at  advanced  than  at  younger  ages.  Common 
observation  will  confirm  this  statement,  and  the  reason  for  the  fact  is  found  in  the 
natural  law  which  fixes  a  limit  to  human  life. 

The  ordinary  mortality  table  is  constructed  upon  the  assumption  that  the  annual 
death  rate  increases  with  each  year  of  advance  in  age.  Represented  by  dollars  and 
cents,  the  annually  increasing  rates  of  mortality  (or  probabilities  of  dying),  given  in 


222 

the  aggregate  mortality  tables,  are  known  as  "natural  premiums,"  because  they  are 
assumed  to  conform  to  the  natural  law  that  increases  the  insurance  risk  with  the 
yearly  advance  in  age. 

In  reality  these  assumptions  are  not  in  strict  accord  with  facts,  but  reflect  a  fiction 
of  much  greater  value  to  the  life  insurance  business  than  if  the  theory  literally  fol- 
lowed the  facts. 

It  is  not  true  that  there  is  a  law  of  mortality  as  fixed  and  as  definite  as  the  law  of 
gravitation,  and  it  is  not  true  that  actual  death  rates  amongst  selected  or  unselected 
lives  increase  either  regularly  or  progressively  from  year  to  year  as  age  advances. 
Investigation  and  exposure  of  actual  conditions  show  that'  the  death  rates  of  insured 
persons  are  both  irregular  and  erratic  when  compared  for  different  ages  and  for 
different  years.  All  that  can  be  stated  truthfully  is  that  the  tendency  to  an  increase 
in  death  rate  with  advance  in  age  is  present  in  every  mortality  experience  after  about 
age  ten.  For  each  of  several  years  after  birth  the  death  rate  decreases;  then  it 
increases  for  several  years  to  about  age  eighteen;  then  the  tendency  is  toward  a  slight 
decrease  for  about  ten  years,  followed  by  an  almost  uniform  rate  for  about  ten  or 
twelve  years,  after  which  the  general  tendency  is  toward  an  increase  to  about  age 
fifty,  with  very  marked  and  abrupt  advances  between  ages  fifty  and  seventy;  while 
after  the  latter  age  there  is  considerable  uniformity  in  the  rate  of  increase  for  ten  or 
fifteen  years.  An  irregular  line  will  fairly  represent  the  rate  at  the  very  advanced 
ages,  when  men  wear  out  and  die  from  natural  decay. 

A  table  of  mortality  constructed  from  the  exposures  to  death  of  female  lives  will 
differ  from  one  constructed  from  the  exposure  to  death  of  male  lives  in  that  the 
death  rates  of  the  former  will  be  slightly  higher  for  ages  15  to  25,  and  then  somewhat 
lower  for  ages  25  to  about  43,  and  then  materially  higher  for  ages  about  43  to  50 
or  53;  afterward  for  all  older  ages  the  female  death  rate  is  below  that  of  males. 
In  all  experiences,  that  have  come  under  my  observation,  there  is  a  pronounced 
"hump"  in  the  female,  table  for  ages  between  40  and  55.  This  is  obviously  due  to 
the  extra  hazard  from  natural  causes  to  which  women  in  middle  life  rare  subjected. 
The  unfavorable  death  rate  for  ages  18  to  25  is  probably  due  to  first  child-birth,  since 
it  is  absent  in  the  experience  of  unmarried  females. 

The  mortality  table  is  the  result  of  smoothing  out  the  irregularities  of  actual  death 
rates  at  the  different  ages,  and  therefore  merely  represents  averages,  and  is  conse- 
quently a  fiction  though  constructed  from  real  mortality  experiences. 

Little  scientific  use  could  be  made  of  the  actual  facts,  and  hence  resort  to  graded 
averages,  rendering  the  fictitious  results  of  more  value  than  the  absolute  facts  them- 
selves. 

NET  PREMIUM  is  the  net  charge  to  provide  for  the  promised  benefit  without  any 
provision  for  expenses.  The  net  premium  is  erroneously  assumed  to  be  divided  into 
two  parts,  namely — the  mortality  element  and  the  reserve  element.  As  a  matter  of 
fact,  net  premium  to  provide  for  a  death  benefit  is  all  for  mortality,  and  it  is  erroneous 
to  conclude  that  it  is  divided  in  the  office,  a  part  going  for  term  mortality  and  a  part 
going  for  accumulation.  It  is  true  that  this  is  the  effect  of  practical  operation,  but  the 
division  is  not  made  in  the  office,  but  is  made  through  the  payment  of  claims  and 
contributions  as  they  .are  received;  the  excess  being  invested  and  accumulated  at 
interest.  If  the  premium  were  divided  into  mortality  and  reserve  elements,  then 
under  a  limited  payment  contract,  when  the  contributions  cease  there  would  be  no 
mortality  element.  When,  as  a  fact,  the  accumulation  becomes  a  single  premium  for 
the  payment  of  mortality  on  the  discontinuance  of  the  contributions  under  a  limited 


223 


.  e%z  / 


7T^ 


224 

payment  policy  or  certificate.  It  has  been  shown  that  the  net  premium  is  computed 
without  any  reference  to  reserve  accumulation,  and  it  is  only  after  the  net  premium 
has  been  determined  that  the  reserve  accumulation  can  be  ascertained.  The  net  pre- 
mium is  in  excess  of  the  current  cost  of  protection  in  the  early  years  of  the  insurance 
contract,  and  in  the  later  years  the  current  cost  of  protection  is  in  excess  of  the  yearly 
net  premium.  This  being  true,  it  follows  that  in  the  early  years  there  is  an  excess  in 
contributions  over  the  cost  of  the  protection.  This  excess  is  laid  away  and  accumulated 
at  interest  until  the  time  when  the  cost  of  protection  exceeds  the  yearly  contributions 
when  the  accumulation  is  drawn  upon  to  make  good  the  deficiency.  The  diagram  on 
the  following  page  will  clearly  illustrate  the  working  of  the  net  premium. 

There  are  three  net  premiums  illustrated,  one  of  $7.46  for  a  term  insurance  to 
age  50;  one  for  $12.04,  the  annual  premium  for  term  insurance  to  age  70,  and  $16.62, 
the  annual  net  premium  for  whole  life  insurance  on  a  person  at  age  35.  The  first 
horizontal  line  marked  $7.46  represents  the  level  annual  net  premium  for  term  insur- 
ance to  age  50;  the  horizontal  line  marked  $12.04  represents  the  net  level  annual  pre- 
mium for  term  to  age  70,  while  the  horizontal  line  marked  $16.62  represents  the  level 
whole  life  annual  premium  for  a  person  at  age  of  entry  35  and  promising  $1,000  pay- 
able at  death  whenever  that  event  occur.  Under  the  whole  life  policy  and  (provided 
the  event  occur  prior  to  age  70  or  age  50)  under  the  term  contract,  the  diagonal 
line  marked  YZ  represents  the  annually  increasing  cost  of  protection,  beginning  at 
$6.15  in  the  first  year  of  age  35-36  and  increasing  annually  to  the  end  of  life  or  to 
the  end  of  the  term  of  protection.  The  values  represented  by  the  diagonal  line  below 
the  horizontal  lines  represents  the  period  when  the  annual  level  contribution  rate 
exceeds  the  annually  increasing  cost  of  protection.  And  the  triangles  to  the  left  of 
the  diagonal  line,  as  explained  in  the  diagram,  represent  the  accumulated  surplus 
when  the  contributions  are  in  excess  of  the  cost  to  make  good  the  deficiencies  repre- 
sented by  the  triangles  on  the  right  of  the  diagonal  line  when  the  cost  of  protection 
exceeds  the  annual  contribution.  The  amount  of  excess  contribution  is  largest  in  the 
first  year  of  insurance,  and  it  decreases  with  the  increase  in  the  cost  of  protection 
until  at  the  point  where  the  diagonal  line  crosses  the  horizontal  lines,  when  the  cost 
of  protection  is  equal  to  the  annual  level  premiums.  Above  the  intersection  of  these 
lines  the  cost  of  protection  is  in  excess  of  the  annual  contribution,  when  there  is  a 
deficiency  that  is  made  good  by  drawing  upon  the  accumulation  from  the  previous 
excess  contributions  and  interest. 

THE  LOADING  of  an  insurance  contract  is  the  designation  commonly  used  in  referring 
to  the  amount  added  to  the  net  premium  for  expense  purposes.  I  have  explained  this 
matter  in  the  chapter  dealing  with  expenses. 

THE  NATURAL  PREMIUM  and  THE  LEVEL  PREMIUM  I  have  also  explained  in  previous 

AND    SUBSEQUENT   pagCS. 

THE  RESERVE  ordinarily  is  the  required  accumulation  to  maintain  the  contribution 
rates  level  and  uniform  during  the  period  of  protection  as  illustrated  in  the  foregoing 
diagram,  where  for  a  term  insurance  to  age  50  the  reserve  accumulation  is  represented 
by  the  triangle  with  the  apex  at  A.  The  accumulation  for  term  insurance  to  age  70 
is  represented  by  the  triangle  with  the  apex  at  B,  while  the  reserve  accumulation  on  a 
whole  life  insurance  is  represented  by  the  triangle  with  the  apex  at  C.  It  will  be 
observed  that  the  reserve  accumulation  varies  with  the  duration  and  the  period  of 
protection.  It  also  varies  with  the  character  of  the  contract.  For  example,  a  con- 
tract for  term  insurance  to  age  50  requires  a  very  much  less  reserve  than  a  whole 


225 


life  contract,  and  an  endowment  insurance  requires  a  much  larger  reserve  accumula- 
tion than  the  whole  life.  The  reserve  accumulation  on  an  endowment  insurance  is 
of  a  two-fold)  character;  one  part  is  for  the  purpose  of  maintaining  the  contribution 
rates  level  and  uniform  during  the  period  when  death  benefit  is  promised  and  the 
other  is  for  the  accumulation  of  the  endowment  at  the  end  of  the  period.  So  also 
is  the  reserve  on  limited  payment  contracts  of  a  dual  character,  in  that  it  is  a  reserve 
for  a  term  insurance  during  the  premium-paying  period  and  a  reserve  accumulation 
for  the  purpose  of  providing  a  single  premium  at  the  end  of  the  premium-paying 
period.  As  a  matter  of  fact,  whole  life  insurance  may  be  considered  as  a  term  insur- 
ance to  the  limiting  age  of  the  mortality  table,  with  an  endowment  to  the  survivors  at 
that  age;  therefore,  the  reserve  could  be  considered  as  of  dual  character,  in  that  it 
would  provide  for  term  insurance  to  the  end  of  the  mortality  table  and  for  the  endow- 
ment payable  to  the  survivors  at  that  age.  The  reserve  accumulation  not  only  depends 
upon  the  character  of  the  contract  and  the  duration  of  the  period  of  protection,  but 
also  upon  the  rate  of  interest  and  mortality  assumption  in  the  computation  of  the 
contribution  rates.  However,  there  may  be  identical  reserve  accumulations  where  the 
interest  assumption  is  the  same,  but  the  mortality  assumptions  are  different.  To 
illustrate  this  point,  I  give  the  yearly  cost  of  insurance  or  death  rate  per  $1,000  accord- 
ing to  three  different  assumed  tables ;  the  first  being  designated  as  "Normal  Mortality," 
the  second  "Sub-Normal  Mortality,"  and  the  third  "Super-Normal  Mortality."  That 
is  to  say,  taking  the  first  table  as  normal,  the  second  one  being  lower  is  termed  sub- 
normal and  the  third  one  being  higher  is  termed  super-normal.  I  give  below  the 
annual  death  rate  per  $1,000  for  every  five  years  from  age  20  to  95  inclusive: 

DEATH  RATE  PER  1,000. 


Ages 

Normal 
Mortality 
(1) 

Sub-normal 
Mortality. 
(2)    ' 

Super-normal 
Mortality. 
(3) 

20 

5.72 

3.57 

7.97 

25 

7.07 

4.82 

9.43 

30 

7.71 

5.33 

10.20 

35 

8.62 

6.08 

11.28 

40 

10.01 

7.27 

12.89 

45 

12.24 

9.21 

15.42 

50 

15.72 

12.34 

19.27 

55 

21.23 

17.37 

25.28 

60 

29.83 

25.31 

34.58 

65 

43.27 

37.84 

48.97 

70 

64.10 

57.40 

71.13 

75 

96.04 

87.56 

104.95 

80 

144.26 

133.25 

155.82 

85 

215.22 

200.69 

230.48 

90 

315.79 

296.47 

336.08 

95 

449.61 

424.28 

476.21 

When  the  reserves  are  worked  out  by  the  mortality  tables,  for  which  the  above 
death  rates  are  given,  it  is  found  that  they  are  identical.  That  is  to  say,  that  at  the 
end  of  each  year  the  terminal  reserve  is  the  same  whether  we  assume  normal  mortality, 
sub-normal  or  super-normal  mortality.  On  a  3  per  cent  basis  the  following  are  the 
annual  premiums  per  $1,000  deduced  from  the  three  tables.  It  will  be  found  that  the 
premiums  of  the  sub-normal  mortality  are  lower  than  those  derived  from  normal, 


226 


while  those  from  the  super-normal  are  higher  than  those  from  the  normal,  as  will  be 
seen  from  the  following: 

ANNUAL  PREMIUM  PER  $1,000. 


Normal 

Sub-normal 

Super-normal 

Ages. 

Mortality. 

Mortality. 

Mortality. 

(1) 

(2) 

(3) 

20 

14.23 

12.17 

16.40 

25 

16.28 

14.12 

18.55 

30 

18.73 

16.45 

21.13 

35 

21.86 

19.43 

24.41 

40 

25.89 

23.27 

28.64 

45 

31.15 

28.28 

34.17 

50 

38.09 

34.88 

41.45 

55 

47.37 

43.73 

51.21 

60 

59.97 

55.73 

64.43 

65 

77.32 

72.24 

82.63 

70 

101.49 

95.27 

108.03 

75 

135.51 

127.66 

143.73 

80 

183.54 

173.42 

194.19 

85 

250.87 

237.54 

264.91 

90 

343  .  19 

325.48 

361.81 

95 

462.34 

438.81 

486.87 

For  emphasis  let  me  repeat  that  when  the  reserves  are  worked  out  on  the  'basis 
of  the  above  contribution  rates  and  the  mortality  .assumed  in  the  respective  tables,  it 
is  found  that  they  are  identical ;  that  is  to  say,  the  terminal  reserve  accumulated  at  the 
end  of  each  year  is  the  same  whether  we  assume  normal  mortality,  sub-normal  or 
super-normal  mortality,  but  assuming  the  rate  of  contribution  as  above  given.  How- 
ever, if  we  use  the  normal  mortality  in  connection  with  the  sub-normal  contribution 
rates,  then,  of  course,  the  reserve  accumulation  would  be  different  from  that  where 
we  use  the  sub-normal  mortality  in  connection  with  the  sub-normal  contribution. 
Were  we  to  employ  the  normal  mortality  in  a  valuation,  while  having  as  a  basis  the 
contribution  rates  of  the  sub-normal  mortality,  then  the  reserve  would  be  inadequate. 
This  "reference  is  of  importance,  because  of  the  often  expressed  idea  that  the  net 
reserve  accumulation  is  the  same  or  about  the  same  whether  we  make  the  valuation 
on  the  basis  of  the  American  Experience  Table  of  Mortality,  or  on  the  National  Fra- 
ternal Congress  Table  of  Mortality.  This  is  true  only  when  the  contribution  rateo 
are  taken  as  derived  from  the  respective  tables.  Were  we  to  make  a  valuation  on  the 
basis  of  the  contribution  rates  of  the  National  Fraternal  Congress  Table,  while  em- 
ploying the  American  Experience  Table  of  Mortality  as  the  basis  for  the  valuation, 
then  we  would  find  that  the  reserve  would  be  inadequate,  but  if  we  were  to  make  a 
valuation,  using  the  contribution  rates  derived  from  the  National  Fraternal  Congress 
Table  and  employing  contribution  rates  according  to  that  table,  we  should  obtain 
reserve  accumulation  about  the  same  as  when  we  employ  the  contribution  rates 
derived  from  the  American  Experience  Table  of  Mortality  and  based  on  the  valuation 
upon  the  death  rate  according  to  that  table.  This  may  be  better  understood  by  making 
an  example  from  the  three  tables  above  given. 

It  will  be  observed  that  the  annual  rate  on  3  per  cent  basis  by  the  sub -normal 
mortality  table  for  age  20  is  $12.17  per  $1,000  of  protection,  while  the  annual  net  rate 
per  $1,000  according  to  the  super-normal  is  $16.40.  Here  there  is  a  difference  of 
$4.23  per  $1,000  in  net  premiums,  and  yet  the  reserve  accumulation  at  the  end  of  any 


227 


year  is  identical  for  both  premiums;  that  is  to  say,  the  reserve  accumulation  for  a 
net  premium  of  $12.17  at  the  end  of,  say  the  tenth  year,  employing  the  sub-normal 
mortality  assumption  in  the  determination  of  the  amount,  is  identical  with  the  reserve 
accumulation  by  the  premium  of  $16.40  at  the  end  of  the  tenth  year.  In  other  words, 
as  a  standard  of  net  valuation,  the  table  which  produces  the  lower  premium  would 
give  as  large  an  accumulation,  as  a  measure  of  commercial  solvency,  as  would  the 
table  which  produces  the  larger  premium.  Similarly  the  same  reserve  would  be  accu- 
mulated by  the  premium  of  $14.23,  which  is  derived  from  the  normal  mortality  table. 
The  example  will  emphasize  this  statement : 

ENTRY  AOE  20. 


Annual 
Premium 

Value  of  $1,000 
Insurance,  End 
of  10th  Year. 

Value  Future 
Premiums. 

Required  Accu- 
mulation, End 
of  10th  Year. 

Normal  

$14.23 

$342.00 

$299.00 

$43.00 

Sub-normal  

12.17 

312.00 

269.00 

43.00 

Super-normal 

16  40 

370  00 

327  00 

43.00 

All  of  the  above  values  are  based  on  3  per  cent  interest  assumption.  The  above 
accumulation  at  the  end  of  10  years  is  much  less  than  the  reserve  of  the  American 
Experience,  the  National  Fraternal  Congress  or  the  Actuaries'  Table  of  Mortality 
with  4  per  cent  interest  assumption.  The  reserves  per  $1,000  being,  respectively, 
$65,  $69  and  $73.  It  will  be  observed  that  the  reserve  by  the  National  Fraternal  Congress 
Table  is  $4.00  higher  than  that  of  the  American  Experience  and  $4.00  less  than  that 
of  the  Actuaries'  Table.  Later  on  this  showing  will  be  given  further  attention. 

In  practical  operation  the  largest  reserve  accumulation  is  required  on  the  protection 
for  the  members  at  advanced  ages,  because  ordinarily  it  is  of  the  longest  duration. 
In  total  amount  the  required  reserve  accumulation  is  largest  for  the  middle  ages, 
because  in  the  course  of  operation  the  membership  of  any  large  insurance  company 
or  society  is  greater  at  these  ages,  with  the  tendency,  of  course,  to  mass  the  member- 
ship always  at  the  more  advanced  ages.  In  this  connection  it  will  be  interesting  to 
reproduce  a  diagram  made  by  Carlan  A.  Brown,  Grand  Master  Workman  of  the 
Massachusetts  Ancient  Order  of  Workmen,  in  an  article  published  in  Vol.  2  of  '.he 
Criterion.  He  gives  the  ages  attained  and  the  number  of  members  and  illustrations 
for  the  grand  jurisdiction  of  the  Ancient  Workmen  of  Massachusetts,  for  the  years 
1885,  1890,  1895,  1901.  The  diagram  graphically  represents  the  distribution  of  mem- 
bership and  the  progress  toward  massing  at  the  advanced  ages.  The  membership  is 
divided  into  three  sections  for  ages  18-44,  45-54,  and  55  and  older.  A  more  striking 
illustration  could  not  be  made  of  the  passing  of  members  from  the  maximum  age  of 
admission  into  the  higher  ages.  The  diagram  tells  the  tale  of  increasing  mortality 
cost  and  the  reason  for  increasing  rate  or  the  number  of  assessments  under  defective 
plan.  The  purpose  of  the  illustration  was  to  show  that  the  number  of  assessments 
which  would  provide  for  the  mortality  claims  in  1885  when  the  membership  was  at 
the  younger  ages  would  not  provide  for  the  claims  in  1890,  when  they  had  progressed 
toward  the  advanced  ages,  nor  in  1895,  when  the  massing  of  the  members  was  still 
greater  at  the  advanced  ages,  and  especially  would  be  inadequate  in  1901  when  the 
number  of  members  older  than  .age  55  would  exceed  the  total  number  of  members 
below  age  50  in  1885.  I  reproduce  the  diagram  for  its  educational  effect  in  many 


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229 

directions.  In  this  connection  I  also  reproduce  an  article  furnished  to  May  and  June 
issue  of  the  Criterion  in  1904  by  Professor  S.  A.  Still-well,  Actuary  then  and  now  for 
the  Ohio  Insurance  Department.  This  article  relates  to  reserve  accumulation  under 
the  American  Experience  Table  of  Mortality,  the  National  Fraternal  Congress  Table 
and  the  Actuaries'  Table,  and  is  supplemental  to  the  showing  made  for  the  normal, 
sub-normal  and  super-normal  mortality  tables. 

In  an  exhibit  of  reserves  in  the  Criterion  of  March-April,  credit  is  given  me  for 
the  special  method  of  exhibiting  these  reserves  at  different  ages  on  the  three  mortality 
tables — American,  Actuaries',  and  National  Fraternal  Congress — with  compound  inter- 
est at  same  rate  in  all  cases.  The  purpose  of  the  exhibit  would,  I  think,  be  more 
readily  seen  if,  while  retaining  the  same  figures  and  headings,  the  National  Fraternal 
Congress  reserves  were  put  in  the  dark-faced  type  and  the  Actuaries'  reserves  in 
italics,  as  below  (leaving  the  American  in  ordinary  type),  as  one  can  follow  the  dark- 
faced  type  more  easily  than  the  italics.  The  dark-faced  type  will  be  found  to  be  sand- 
wiched, as  it  were,  almost  throughout  between  the  other  two.  Only  at  the  attained 
ages  from  50  to  65  would  the  dark-faced  type  move  up  into  the  first  or  lowest  place 
in  the  reserves.  I  hardly  need  state  that  these  reserves  are  for  whole  life  policies 
with  level  rates : 

FOUR  PER  CENT  ACCUMULATION  ON  $1,000. 
ENTRY  AGE  20. 


At  End  of  Years— 


1 

2 

3 

4 

5 

10 

15 

20 

25 

30 

35 

40 

45 

50 

55 

60 

5 

11 

1 

23 

29 

65 

108 

159 

220 

291 

371 

455 

541 

624 

696 

760 

6 

12 

18 

25 

31 

69 

114 

167 

228 

296 

373 

456 

542 

626 

704 

776 

6 

IS 

19 

96 

33 

73 

119 

173 

236 

307 

384 

465 

546 

629 

707 

779 

ENTRY  AGE  40. 


At  End  of  Years— 


1 

2 

3 

4 

5 

10 

15 

20 

25 

30 

35 

40 

45 

14 

28 

42 

57 

73 

156 

247 

346 

449 

545 

632 

710 

780 

14 

28 

43 

58 

73 

157 

252 

352 

451 

551 

648 

734 

808 

14 

29 

45 

61 

77 

163 

256 

353 

456 

556 

648 

735 

814 

230 

To  illustrate  to  the  eye  the  slight  variations  in  values,  lines  are  drawn  below  for 
age  20,  showing  reserves  by  the  three  .tables  for  several  quin-quennial  years,  and 
extending  to  the  attained  age  of  80.  The  continuous  line  represents  the  National 
Fraternal  Congress  line  of  reserves  ;  the  dotted  line  represents  the  American,  and  the 
dashed  line  represents  the  Actuaries'.  Similar  lines  may  be  drawn  for  other  ages 


0 


f, 


0 


For  earlier  years  and  later  year  of  policies  than  are  given  in  the  chart,  the  National 
Fraternal  Congress  line  runs  between  the  American  line  and  the  Actuaries'  line.  It 
will  be  observed,  by  following  closely  the  dotted  line  and  the  dashed  line  that  the 
American  and  Actuaries'  reserves  are  determined  not  to  be  on  friendly  terms,  for 
when  one  approaches  the  other  it  is  not  to  coincide  with  it,  but  to  cross  it  and  remain 
as  far  apart  as  ever.  It  is  only  at  or  near  this  crossing  point  of  the  American  and 
Actuaries'  reserves  that  the  National  Fraternal  Congress  reserves  fall  below  the  other 
two.  If  it  be  said  that  the  National  Fraternal  Congress  reserves  are  erratic  at  this 
place,  then  it  may  also  be  said  that  the  other  two — American  and  Actuaries' — are 
somewhat  unsteady.  If  the  lines  be  examined  closely  it  will  be  found  that  the  Amer- 
ican and  National  Fraternal  Congress  lines  almost  coincide  throughout  their  entire 
extent.  The  differences  between  the  lines  are  indicated  in  the  chart  by  small  numbers 
placed  below  and  above  the  three  lines. 


231 


A  table  of  differences  below  will  show  how  much  more  closely  the  National  Fra- 
ternal Congress  reserves  follow  the  American  than  they  follow  the  Actuaries' : 

FOR  AGE  20. 


At  End  of  Years  — 

Difference  Between  N.  F.  C. 
and  American. 

Difference  Between  N.  F.  C. 
and  Actuaries'. 

5 

+$2.00 

-$2.00 

10 

+  4.00 

-  4.00 

15 

+  6.00 

-  5.00 

20 

+  8.00 

-  6.00 

25 

+  8.00 

-  8.00 

30 

+  5.00 

-11.00 

35 

+  2.00 

-11.00 

40 

-  1.00 

-10.00 

45 

-  1.00 

-  5.00 

50 

-  3.00 

+  2.00 

55 

+  3.00 

+11.00 

60 

+  3.00 

+19.00 

Where  both  columns  are  minus  ( — )  the  National  Fraternal  Congress  reserves 
fall  slightly  below  the  other  two,  and  where  both  columns  are  plus  (+)  the  National 
Fraternal  Congress  reserves  are  higher  than  the  other  two. 

Below  will  be  found  an  exhibit  of  net  life  level  rates  by  the  three  mortality  tables 
with  four  (4)  per  cent  compound  interest,  and  the  percentages  to  be  taken  of  the 
Actuaries'  to  produce  the  National  Fraternal  Congress,  and  the  same  with  respect  to 
the  American,  showing  that  in  no  instance  is  the  National  Fraternal  Congress  net 
level  rate  less  than  eighty  (80)  per  cent  of  that  by  the  American  or  Actuaries' : 


Actuaries' 

American 

N.  F.  C. 

Ratio  of 

Ratio  of 

Ages. 

4%  Net 

4%  Net 

4%  Net 

N.  F.  C.  to 

N.  F.  C.  to 

Level  Rates. 

Level  Rates. 

Level  Rates. 

Actuaries. 

American. 

20 

$12.95 

$12.67 

$10.34 

80.0% 

81.4% 

30 

16.97 

16.21 

13.96 

82.1% 

86.2% 

40 

23.68 

22.35 

20.11 

84.8% 

89.8% 

50 

35.78 

33.70 

30.91 

86.3% 

91.7% 

60 

57.56 

55.45 

51.13 

88.7% 

92.1% 

Comparing  also  the  National  Fraternal  Congress  4  per  cent  net  life  level  rates 
with  the  same  by  the  American  mortality  table  and  3^/2  per  cent  interest  (which  is  now 
the  basis  for  rates  in  nearly  all  the  old  line  companies),  we  obtain  the  following  table: 


Ages. 

American  3£%. 

N.  F.  C.  4%. 

Ratio. 

20 

$13.48 

$10.34 

76.6% 

30 

17.19 

13.96 

81.2% 

40 

23.50 

20.11 

85.6% 

50 

34.99 

30.91 

88.3% 

60 

56.83 

51.13 

90.0% 

Hence,  except  at  very  early  ages,  the  National  Fraternal  Congress  4  per  cent  net 
life  level  rates  are  greater  than  80  per  cent  of  the  American  3^  per  cent  net  rates. 

EXPECTATION  OF  LIFE  means  the  average  number  of  years  which  persons  of  a  certain 
age  will  survive.  It  has  no  relation  to  the  time  the  individual  will  probably  die,  nor  to 
the  time  when  death  is  most  probable.  The  individual  may  die  today  or  tomorrow  or 


232 

25  years  hence,  while  his  life  expectancy  may  be  10  years  or  20  years  or  40  years.  To 
find  the  years  of  life  expectancy,  sum  the  number  in  the  column  of  members  living 
given  in  the  mortality  table  from  the  age  one  year  older  than  the  given  age  to  the  end 
of  the  table,  and  then  divide  the  total  by  the  number  living  at  the  given  age.  This 
will  give  what  is  known  as  the  curtate  expectation  of  life.  The  complete  expectation 
is  obtained  by  adding  five-tenths  to  the  number  of  years  for  the  curtate  expectation. 

INSURANCE  COST.  The  illustrations  given  correspond  to  the  natural  premiums  or 
probabilities  of  dying  per  1,000,  as  given  in  table  i  of  the  appendix  to  this  book. 
Technically,  and  as  given  in  the  text-book,  insurance  cost  is  a  product  of  the  prob- 
ability of  dying  by  the  difference  between  the  sum  insured  and  the  reserve  accumu- 
lation. 

For  example,  Suppose  there  are  one  million  of  insurants  at  age  35,  and  at  the  end 
of  the  year  on  whole  life  certificates  there  is  $11.20  per  $1,000  reserve  accumulation, 
or  $11,200  on  the  $1,000,000  of  protection.  If  we  subtract  the  $11,200  from  the 
$1,000,000  we  have  remaining  $988,800  which  is  technically  called  the  amount  "at  risk;" 
that  is  to  say,  it  is  assumed  that  the  company  holds  $11,200  of  the  funds  of  members, 
and  consequently  the  amount  at  risk  is  the  face  value  of  the  certificates  less  the 
reserve  accumulation,  making  as  stated,  net  amount  at  risk  of  $988,800  on  the  $1,000,000 
of  protection.  The  probability  of  dying  at  age  35  is  .00615,  and  multiplying  this  by 
the  $988,800  we  obtain  $6,081  as  the  cost  of  insurance  on  $1,000,000  of  protection,  or 
$6.08  per  $1,000. 

It  may  be  further  added  that  if  the  cost  of  the  protection  is  $6.08,  and  the  whole 
life  level  net  premium  at  age  35  is  $16,62;  if  we  improve  the  latter  for  one  year  at 
4  per  cent,  we  get  $17.28,  and  subtracting  the  cost  of  protection,  $6.08,  we  have  $11.20 
per  $1,000  as  the  reserve  accumulation,  or  as  first  stated,  $11,200  on  $1,000,000  of 
protection. 

Taking  $6.15  per  $1,000  as  the  cost  of  protection,  the  following  example  will 
illustrate  the  method  of  determining  the  reserve  accumulation.  We  will  take  the 
tabular  number  living,  92,215,  at  age  35,  and  assume  that  each  one  carries  $1,000,  and 
that  the  annual  net  contribution  is  $16.62,  then  we  have  the  following  exhibit : 

92,2i5X$i6.62— Premium    Payments    $1,532,613.30 

Interest  at  4  per  cent  for  i  year 61,304.50 

Premium  and  Interest  end  of  first  year  i,593>9I7-8o 

92,2i5X$6.i5=Death    Claims    567,000.00 

Accumulation  end  of  year   1,026,917-80 

We  began  the  year  with  $92,215,000  protection  and  there  was  $567,000  in  claims, 
leaving  at  the  end  of  the  year  $91,648,000  of  protection.  Dividing  the  $1,026,917.80 
by  91,648  we  obtain  the  reserve  at  the  end  of  the  year,  which  is  $11.20  per  $1,000,  and 
precisely  the  same  as  obtained  by  the  method  of  subtracting  the  cost  of  the  protection 
as  technically  determined  from  the  annual  premium  and  accrued  interest  for  one  year. 

If  the  single  premium  of  $301.67  is  illustrated,  instead  of  the  annual  premium  of 
$16.62,  we  would  have  this  example : 

92,2i5X$30i.67=premiums    $27,818,663.44 

Interest  one  year   1,1 12,746.54 

Interest  and  premium   28,931,409.98 

92,215  X$6. 1 5=claims    567,000.00 

Total  accumulation  28,364,409.98 

Divided   by  91,648    3O9-49 

or  the  single  premium  at  end  of  the  first  year  which  is  the  reserve  for  the  91,648 
survivors  of  the  original  92,215  entrants. 


233 

In  every  case  the  results  of  the  two  methods  in  respect  of  reserve  accumulation  are 
identical,  and  since  there  are  advantages  to  be  gained  by  assuming  that  the  cost  of 
protection  is  the  product  of  the  probability  of  dying  by  the  difference  between  the  sum 
insured  and  the  reserve  accumulation,  I  would  not  occupy  space  to  give  my  view  con- 
cerning the  matter  were  it  not  that  a  principle  is  involved  in  regard  to  the  conduct 
of  Fraternal  Beneficiary  Societies  under  existing  conditions. 

However,  from  a  technical  standpoint,  I  contend  that  the  above  illustration  which 
assumes  that  the  probability  of  dying  corresponds  to  the  cost  of  protection  is  in 
accord  with  actual  practice. 

In  no  office  do  officials  pay  a  part  of  the  claims  from  current  contributions  and 
then  make  draft  upon  the  reserve  accumulation  for  a  portion  of  the  claims.  As  a 
matter  of  fact,  the  claims  are  paid  out  of  current  contributions,  and  the  reserve  accu- 
mulation is  permitted  to  remain  invested  for  the  benefit  of  the  survivors. 

I  assert  that  the  method  illustrated,  being  in  accord  with  practice,  is  the  better  one, 
and  is  technically  correct. 

If  we  analyze  the  individual  position  of  one  of  the  survivors,  this  is  found : 

Premium    Payment    $16.62 

Interest^  ($io.62X-04) 66 

Premium  and   Interest    17.28 

Share  of  Claims   6.15 

Surplus  from   Premium  and  Interest   11.13 

Mortuary   Accretion    07 

Reserve    $11.20 

The  "mortuary  accretion"  comes  from  the  share  of  each  survivor  in  the  surplus 
from  contribution  and  interest  of  the  567  who  died.  Each  one  of  the  567  paid  $16.62, 
which  earned  66  cents,  and  the  total  of  $17.28,  less  $6.15,  the  share  of  each  in  the 
claims,  yielded  a  surplus  at  the  end  of  the  year  of  $11.13,  exactly  the  same  as  for  each 
survivor.  The  total  for  the  567  who  died  was  : 

567X$ii.i3X$6,3n.oo, 

and  6,3 1 1 -4-9 1, 648=. 07  for  each  survivor,  which  added  to  the  surplus  for  each,  $11.13, 
makes  the  reserve  $11.20. 

The  contention  that  the  reserve  belongs  to  the  member  has  led  many  to  the  con- 
clusion that  it  should  be  returned  in  addition  to  the  sum  insured.  This  conclusion 
could  not  result  from  the  true  exposition  that,  under  ordinary  computations,  the  reserve 
is  not  to  be  paid  to  beneficiaries  of  deceased  members,  but  upon  the  assumption  that 
it  will  be  appropriated  for  the  benefit  of  survivors  in  the  way  of  "mortuary  increment." 

At  the  advanced  ages  the  "mortuary  increment"  is  much  larger  than  the  "interest 
increment"  for  accumulation. 

My  contention  is  supported  further  by  the  general  employment  of  the  u  and  k 
columns  in  computing  reserves.  With  these  factors  the  reserves  per  $1,000  are  deter- 
mined precisely  as  illustrated  for  the  $16,62  annual  rate  where  $92,215,000  were 
involved.  In  the  illustration  the  $567,000  of  claims  were  paid  from  the  current  con- 
tributions, including  $6.15  per  $1,000  paid  by  the  567  who  died.  The  $11.20  of  accu- 
mulation was  retained  in  the  reserve  fund  for  the  benefit  of  the  91,648  survivors. 

In  computing  reserves  per  1,000,  the  accumulation  factor,  u,  corresponds  to 
the  interest  factor  in  the  illustration,  while  the  decrement  factor,  k,  corresponds  to 
the  deductions  for  claims.  The  u  and  the  k  are  larger  than  the  interest  and  mortality 


234 

rates  in  order  to  account  for  the  "mortuary  increment."    The  u  and  k  factors  are  thus 
developed  : 

Let  135=  92,215  =  Insurants  at  age  35. 

P35  =  $16  .  62  =  Premium. 
l+i=     1.  04  =(i  =  interest). 
d36  =       567  =  Members  died. 
iv35=  Accumulation  or  reserve.     Then 


From  the  illustration  it  was  seen  that  the  total  reserve  accumulation  at  the  end  of 
the  year,  $1,026,917.80,  was  divided  between  the  91,648  survivors,  giving  $11.20  to  each 
per  $1,000  of  insurance.  Now  let 

I3e  =  survivors  =  Iss+i, 
then 


but, 

las       1        A     ,  d35     dismiss- 
r~  =  —  •     Anci-r-=^j—  A;  — 

136       P35  136         135       136 

substituting,  we  have, 

P36X—  =  ^6  =  P36Xu35-k35  =  1V35. 

P35         P35 

By  reference  to  Table  1,  we  find  q35=.  0061487  :p35  being  its  complement  =  .9938513.  Substi- 
tuting, we  have  P35  X  1.04  -=-.993851  3  =  1.  04643  =  u36,  and  .0061487  ^-.9938513  =  .0061  87  and  6.187 
=  l,000k35.  Making  an  example,  we  have, 

P36  =  Premium  .....................................................  $16.62 

u36  =  Accumulation  Factor  ..........................................  1  .04643 

P35Xu86  =  Accumulation  end  of  year  ......................................     17  .39 

k35  =  Decrement  Factor  .............................................       6.  19 

iv35  =  Reserve  at  end  of  first  year  ....................................     1  1  .  20 

Very  generally  the  u  and  k  columns  arc  employed  to  calculate  in  advance  the 
reserves  per  $1,000  for  use  in  "net  valuations,"  and,  as  seen,  the  k  is  directly  derived 
from  the  probability  of  dying,  or  death  rate,  and  this  is  the  decrement  factor  as  was 
qx  in  the  first  illustration. 

Notwithstanding  the  apparently  good  arguments  to  support  •my  position,  I  stand 
alone  in  undertaking  to  maintain  it. 

Elizur  Wright,  in  1850,  asserted  that  the  reserve  was  of  the  nature  of  a  savings 
bank  deposit,  and  when  the  insured  saw  fit  to  break  his  contract  he  had  a  right  to 
demand  the  surrender  of  his  reserve  (less  a  reasonable  surrender  charge),  and  from 
that  time  to  now  an  individual  interest  in  the  reserve  has  been  recognized. 

In  such  circumstances  it  was  natural  to  develop  the  theory  that  the  insurance 
company  held  the  reserve  in  trust  to  be  paid  to  beneficiaries  at  the  death  of  the  mem- 
ber, or  returned  to  the  member  on  his  withdrawal.  In  this  view  the  reserve  is  truly 
a  "reinsurance  fund,"  belonging  to  the  insured  as  much  as  a  bank  deposit. 

If  carried  to  this  logical  conclusion,  then  there  should  be  an  individual  accounting 
and  a  right  of  withdrawal  of  credits  on  notice. 

I  cannot  subscribe  to  such  a  theory.    It  would  be  subversive  of  insurance  principles. 

Present  payments  to  provide  for  the  inevitable  future  increase  in  the  cost  of  insur- 
ance are  as  much  the  property  of  the  society  or  company  as  present  payments  for 
current  insurance  cost.  While  present  payments  for  future  cost  represent  present 
over-payments  of  current  cost,  later  on  as  age  increases  current  cost  will  exceed  the 
then  present  payments,  and  a  deficiency  will  result  between  current  collections  and 


235 

current  claims,  when  the  previous  advance  payments  are  brought  into  requisition  to 
cover  the  deficiency.  The  early  excess  contributions  over  current  cost  are  absolutely 
necessary  under  the  level  premium  plan,  and  are  as  much  a  part  of  the  insurance 
funds  as  are  the  portions  of  contributions  used  for  current  cost.  If  the  insured 
desires  to  change  or  annul  his  contract,  by  agreement  that  will  not  injure  the  society 
or  company,  a  return  might  be  made  of  the  excess  accumulation. 

I  arrive  at  the  equity  of  surrender  values  from  a  different  course  of  reasoning. 
Thus: 

All  insurance  is  cooperative,  the  very  object  of  it  being  to  distribute  losses. 

It  proceeds  on  the  theory  of  averages,  and,  therefore,  an  insurance  society  which 
is  scientifically  operated  assumes  as  a  unit  the  entire  group  of  members  who  enter  at 
a  particular  age,  during  a  particular  year,  on  the  same  form  of  contract. 

All  payments  made  by  members  of  the  group  are  treated  as  items  of  an  individual 
account. 

The  term  "individual  reserve"  is  largely  a  misnomer,  as  it  simply  means  the"  share 
of  each  individual  of  the  group  in  the  entire  reserve  for  the  group.  It  becomes  of 
importance  chiefly  when  a  member  desires  to  change  the  form  of  his  contract  from 
whole  life  protection ;  for  instance,  to  temporary  protection,  the  latter  requiring  a 
smaller  reserve.  It  is  necessary  in  such  circumstances  to  make  an  individual  adjust- 
ment with  this  particular  member,  which  is  done  by  returning  to  him  his  individual 
share  of  the  reserve,  according  to  his  previous  contract,  or  a  definite  portion  thereof: 

Let  us  suppose  that  he  entered  originally  at  age  30  and  desired  a  life  contract  under 
the  level  premium  system.  The  net  annual  price  charged  him  would  be  $13.96  annually, 
by  the  Natnonal  Fraternal  Congress  Table,  and  four  per  cent  interest. 

At  the  end  of  twenty  years  he  decides  that  he  no  longer  wants  the  protection. 

Had  he  originally  applied  for  a  twenty-year  contract,  he  would  have  been  charged 
only  $6.80  annually. 

He  has,  therefore,  paid  $7.16  a  year  in  excess  of  the  amount  required  for  the  pro- 
tection furnished. 

This  excess,  at  least  in  part,  may  be  returned  if  the  demands  of  equity  are  to  be 
satisfied. 

The  larger  premium  was  collected  on  the  assumption  that  the  member's  certificate 
would  eventually  become  a  claim. 

This  assumption  is  nullified  by  his  withdrawal,  and  the  accumulation  provided  in 
conformity  therewith  may  not  be  retained. 

When  the  member  dies,  on  the  contrary,  the  assumption  still  holds.  There  is  no 
change  in  the  contract.  The  certificate  becomes  a  claim.  In  what  year  this  latter 
occurs  is  immaterial. 

Were  it  not  for  the  uncertainty  of  the  date  of  death  there  would  be  no  such  thing 
as  life  insurance.  r 

The  insured  persons  enter  into  mutual  agreement,  under  the  terms  of  a  whole  life 
iunsrance  contract,  to  remain  in  the  association  until  death,  whether  it  occur  soon 
or  late. 

The  rates  of  contribution  are  based  upon  persistence  until  death,  and  upon  such 
conditions  they  are  adequate  to  provide  for  the  payment  of  promised  benefits  at 
death. 

A  payment  of  more  than  the  promised  benefits,  by  a  return  of  a  portion  of  the  con- 
tributed assessments,  would  upset  all  calculations  and  render  the  rates  of  contribution 
insufficient  to  provide  for  the  payment  of  the  future  promised  benefits. 

Maturity  of  the  whole  life  contract  by  death  fulfills  the  conditions  and  terms  of 
the  agreement. 


236 

The  surrender  of  the  contract  abrogates  the  terms  of  the  original  agreement,  and 
renders  unnecessary  the  fund  which  has  been  accumulated  to  insure  its  integrity  were 
it  continued  to  maturity  at  death. 

So  long  as  the  contracts  of  insurance  are  in  force,  accumulated  funds  must  be  held 
in  common  and  cannot  be  considered  as  "individual  deposits,"  of  the  same  character 
as  "deposits  in  a  savings  bank." 

Much  misconception  of  the  character  and  function  of  the  reserve  fund  has  resulted 
from  efforts  to  explain  it. 

The  first  wrong  impression  came  from  the  so-called  "division  of  the  level  premium 
into  its  three  elements — Expense,  Mortality  and  Reserve." 

Taking  age  40  and  an  "Old  Line"  premium,  for  example,  this  "division"  was  made : 

Gross  Expense  Mortality  Reserve 

Premium  Element  Element  Element 

$31-57  $7-89  $9-82  $13.86 

To  this  day  there  are  many  who  believe  the  above  to  be  a  permanent  division,  and 
that  annually  the  amount  of  $13.86  is  set  aside  from  the  gross  premium  for  continuous 
accumulation  into  a  reserve  fund,  "which  goes  on  accumulating  from  generation  to 
generation  long  after  those  who  have  contributed  to  it  have  passed  away." 

It  is  not  unusual  to  find  the  serious,  and  evidently  honest,  statement  in  the  litera- 
ture of  Fraternal  Societies,  that  "the  principal  of  the  reserve  accumulation  is  never 
touched — only  the  interest  is  used  to  keep  down  the  increasing  cost  at  old  age." 

This  misapprehension  largely  proceeds  from  two  sources. 

(1)  The  erroneous  impression  made  by  such  as  the  foregoing  "division"  of  the 
level  premium. 

(2)  The  superficial  consideration  given  to  the  workings  of  the  reserve  by  those 
who  essay  to  discuss  it. 

For  the  purpose  of  net  valuation,  terminal  reserve  values  have  been  computed,  and 
these  values  have  been  very  generally  published,  and  are  often  used  in  making  com- 
parisons of  Mortality  Tables,  as  well  as  for  many  illustrations  in  life  insurance  discus- 
sion. 

Such  publication  and  use  are  appropriate  and  of  material  benefit,  but,  unfortunately, 
they  have  led  those  who  jump  to  conclusions  into  very  erroneous  statements. 

The  truth  of  it  is,  the  breaking  up  of  the  reserve  fund  into  individual  credits  or 
values  can  only  serve  for  analytical  purposes,  and  for  accounting  between  "tenants  in 
common"  when  the  Common  Fund  is  to  be  divided  or  apportioned. 

So,  also,  is  it  a  purely  analytical  process  when  the  level  premium  is  split  into  its 
"elements"  of  "Expense,"  "Mortality,"  and  "Reserve." 

No  practical  results  can  be  arrived  at  by  considering  the  reserve  as  "an  individual 
deposit,"  nor  in  viewing  it  as  separate  and  distinct  from  the  "Mortality"  element. 

It  would  be  equally  practical  to  endeavor  to  make  separate  use  of  hydrogen  and 
oxygen  and  obtain  the  results  derived  from  water,  as  to  try  to  work  out  life  insur- 
ance problems  by  separately  considering  the  "Reserve"  and  "Mortality"  element  of  a 
level  premium,  or  by  undertaking  to  break  up  the  general  reserve  accumulation  into 
individual  credits  of  the  nature  of  deposits  in  bank. 

There  are  but  two  parts  to  a  level  premium,  which  are  the  "Expense"  portion  and 
the  "Mortality"  portion. 

The  "Reserve"  element  is  a  fiction — a  product  of  analysis. 

When  the  expense  portion  is  deducted,  the  balance  (called  the  "Net  Premium")  is 
provided,  by  calculation,  for  the  payment  of  death  losses,  for  "Mortality"  purposes, 
and  for  nothing  else. 


237 

If  the  death  losses  are  less  than  anticipated,  there  results  a  surplus  which  may  be 
returned  to  members. 

However,  the  whole  of  the  "net  premium"  is  primarily  intended  solely  for  the  pay- 
ment of  death  claims,,  and  there  are  no  pre-determined  portions  of  it  for  "Mortality" 
and  "Reserve." 

The  idea  should  be  gotten  rid  of  that  there  are  "Reserve"  and  "Mortality"  elements 
to  a  level  premium,  if  there  is  to  be  a  clear  conception  of  its  real  and  true  function. 

The  idea  should  be  gotten  rid  of  that  the  so-called  reserve  accumulation  is  a  fund 
of  individual  credits,  if  its  true  function  is  to  be  understood. 

The  level  premium  plan,  subjected  to  critical  analysis,  will  reveal  the  following 
conditions  as  a  business  proposition : 

First,  the  individual  insurant,  as  such,  is  not  considered  in  the  determination  of  the 
level  premium.  It  would  be  a  gambling  venture  pure  and  simple  to  undertake  to  insure 
one  life  or  to  enter  into  an  insurance  contract  with  one  person. 

Second,  it  requires  a  considerable  number  of  persons  associated  together  in  mutual 
cooperation  for  practical  and  successful  insurance  business  conduct.  In  such  circum- 
stances only  the  mass  is  considered  in  reference  to  contributions,  and  necessarily  all 
resulting  accumulations  constitute  a  fund  in  common  against  which  individual  demand 
could  not  be  made  unless  the  association  went  into  liquidation,  and  then  each  member 
should  share  in  the  general  distribution  according  to  the  character  of  contracts  carried. 

As  stated,  I  have  made  an  argument  in  the  case  because  of  the  importance  to  the 
Fraternal  Societies.  It  is  of  small  moment  to  life  companies  whether  the  one  or  the 
other  explanation  of  the  working  of  the  level  premium  is  correct.  But  the  very  exist- 
ence of  many  of  the  Fraternal  Societies  depends  upon  the  construction  that  will 
maintain  their  funds  in  common  for  the  sole  purpose  of  providing  for  the  payment  of 
claims. 

If  voluntarily  or  through  compulsion,  Fraternal  Societies  undertake  to  segregate 
the  funds  "and  allow  credits  to  individual  members,  they  must  abandon  the  original 
conception  of  fraternal  protection,  and  should  base  their  contribution  rates  on  a 
higher  table  of  mortality  than  that  of  the  National  Fraternal  Congress  and  4  per  cent 
interest  assumption. 

THE  NET  VALUE  of  a  certificate  or  policy  corresponds  to  the  reserve  accumulation. 
To  put  it  another  way,  the  net  value  represents  the  difference  between  the  present 
value  of  the  benefit  and  the  present  value  of  future  contributions,  under  the  prospec- 
tive method  of  valuation.  Under  the  retrospective  method  of  valuation  the  net  value 
is  represented  by  the  difference  between  the  value  of  accumulated  claims  and  the  value 
of  accumulated  contributions. 

SURRENDER  VALUE  is  the  amount  of  the  reserve  accumulation  which  is  used  as  the 
single  premium  for  the  purchase  either  of  paid-up  insurance  or  extended  insurance, 
or  for  a  loan,  or  given  altogether  for  the  surrender  of  the  certificate  in  settlement  of 
the  contract.  The  amount  deducted  from  the  reserve  is  called  surrender  charge,  and 
this  surrender  charge  is  determined  by  various  methods.  In  some  offices  a  flat  amount 
as  $10  per  thousand  is  deducted  from  the  reserve.  In  other  cases,  there  is  a  percen- 
tage of  the  reserve  taken  as  a  surrender  value;  thus  10  per  cent  is  deducted  for  the 
surrender  charge  and  90  per  cent  used  as  the  single  premium  for  the  purchase  of  the 
surrender  value.  If  the  reserve  were  $100,  and  90  per  cent  used  as  a  surrender  value, 
then  $90  could  be  used  either  as  a  payment  in  cash,  or  as  a  loan,  less  one  annual  pre- 
mium, or  for  the  purchase  of  paid-up  insurance,  or  for  the  purchase  of  extended 
insurance.  Let  it  be  noticed  that  a  "surrender  value"  includes  a  cash  surrender  value, 


238 

a  loan  surrender  value,  a  paid-up  insurance  surrender  value,  or  an  extended  insurance 
surrender  value. 

LOANS.  Until  Elizur  Wright  secured  the  enactment  of  non-forfeiture  laws  in  Mas- 
sachusetts, the  life  companies  (with  one  or  two  exceptions)  allowed  no  surrender 
values — not  even  paid-up  or  extended  insurance.  From  giving  nothing  the  companies 
went  to  the  extreme  of  paying  on  demand  cash  to  the  amount  of  the  reserve.  From 
this  extreme  there  was  a  reaction  to  the  extent  of  deducting  one  annual  premium  from 
the  cash  surrender  value,  and  the  amount  paid  was  called  a  "loan."  The  loans  are 
seldom  paid  off  by  the  policy-holder,  and  consequently  the  real  object  of  life  insur- 
ance is  largely  defeated  through  the  reduction  in  benefits  by  the  lien  against  the  policy. 

A  recent  compilation  by  the  Association  of  Life  Insurance  Presidents  shows  that 
of  reserves  amounting  to  about  three  and  one-half  billions  of  dollars,  $590,000,000  had 
been  loaned  to  policy-holders,  or  about  16  per  cent.  The  amount  of  the  policies  is 
reduced  by  the  total  of  the  loans  and  the  insurance  for  the  protection  of  beneficiaries 
is  five  hundred  and  ninety  millions  less  than  the  face  value  of  the  policies. 

In  answer  to  this  last  statement  it  may  be  asserted  truly  that  were  it  not  for  the 
loan  privilege  on  insurance  policies,  the  policy-holders  would  be  forced  often  to  borrow 
at  a  great  sacrifice,  and  certainly  at  a  less  favorable  rate  of  interest  than  granted  by 
the  life  companies,  and  in  the  end  the  debt  would  exist,  and  many  times  with  the  life 
insurance  policy  as  collateral  and  subject  to  reduction  by  payment  of  the  debt. 

When  the  policy-holder  obtains  a  loan  on  his  policy  he  seldom  repays  it,  and  often 
permits  it  to  accumulate  at  compound  interest,  rapidly  increasing  the  lien  and  finally 
rendering  the  promised  benefit  very  disappointing  to  those  dependent  upon  it  for  relief 
or  support.  A  loan  obtained  from  any  other  scource  is  not  permitted  to  run  indefi- 
nitely, and  at  least  the  interest  must  be  paid  periodically,  so  that  should  the  debt  be 
not  discharged  it  will  not  be  increased  by  compound  interest  additions.  Where  the 
company  requires  payment  of  interest  with  the  payment  of  each  premium  the  interest 
of  the  beneficiary  is  better  protected. 

However,  if  we  are  to  accept  the  theory  that  the  reserve  is  held  by  the  company 
as  an  advance  accumulation  from  the  insured  to  be  used  in  part  payment  of  the 
promised  benefit,  then  the  beneficiary  receives  from  the  company  only  the  difference 
between  the  sum  insured  and  the  reserve  accumulation. 

Therefore,  when  the  beneficiary  is  paid  the  face  value  of  the  policy,  that  part 
representing  the  amount  of  the  reserve  accumulation  is  a  return  of  money  belonging 
to  the  insured  and  simply  held  by  the  company  in  trust. 

If  the  insured,  previous  to  death,  believed  he  could  make  immediate  use  of  this 
trust  fund  for  the  advantage  of  his  family,  and  which  would  be  better  for  his  beneficia- 
ries than  to  delay  its  payment  until  he  died,  why  should  he  be  denied  the  privilege 
of  withdrawing  the  reserve  and  leave  as  protection  the  amount  assumed  as  the  insur- 
ance risk? 

It  seems  to  me  that  the  Life  Insurance  Presidents  are  in  no  position  to  throw 
obstacles  in  the  way  of  policy  loans,  while  they  assert  that  the  reserve  is  an  individual 
credit.  The  president  of  a  savings  bank  would  be  as  much  justified  in  preventing  a 
depositor  from  withdrawing  his  deposit  on  the  ground  that  his  family  would  be  more 
benefited  by  leaving  it  to  accumulate  until  his  death. 

To  hold  that  the  reserve  is  an  individual  credit  produces  such  inconsistency  be- 
tween theory  and  practice  as  to  warrant  my  criticism  of  the  theory. 

In  readjustments  by  fraternal  beneficiary  societies,  loans  or  liens  have  been  entered 
against  certificates,  at  the  option  of  members,  either  to  the  amount  of  the  value  of 
the  difference  between  the  rates  of  contribution  at  attained  and  entry  ages,  or  the 


239 

amount  of  one-half  (or  other  portion)  of  the  monthly  contribution  rate  fixed  by  the 
readjustment.  In  some  cases  the  Hen  is  increased  by  compound  interest;  in  others 
by  simple  interest;  in  others  no  interest  is  charged,  according  to  whether  or  not  the 
advice  of  an  actuary  or  the  suggestion  of  a  delegate  has  been  accepted. 

Members  have  elected  to  reduce  the  insurance  protection  by  the  amount  of  the  liens, 
and  then  the  management  has  had  much  trouble  with  beneficiaries  who  expected  the 
face  value  of  certificates. 

In  my  opinion  the  lamented  President  Greene,  of  the  Connecticut  Mutual,  was 
right  in  refusing  to  pay  cash  or  make  loans  on  policies,  and  confined  surrender  values 
to  paid-up  and  extended  insurance.  He  also  correctly  contended  that  the  funds  of  a 
life  insurance  company  or  society  were  held  for  the  purpose  of  paying  the  benefits 
promised  for  the  protection  of  dependants — that  the  funds  were  held  in  common  for 
the  advantage  of  all  the  insured  persons  according  to  their  contributions  toward  such 
funds. 

Theoretically  there  is  no  objection  to  making  a  loan  to  the  policy-holder  from  the 
reserve  within  the  net  value  of  the  policy. 

Practically  there  is  often  protection  to  the  insurance  by  granting  loans  for  the 
purpose  of  paying  premiums,  especially  when  the  insured  is  unable  to  meet  them 
through  loss  of  wage  or  salary  because  of  disability  or  otherwise.  I  have  recommended 
loans  to  the  amount  of  monthly  or  annual  contributions  when  there  was  accumulation 
from  excess  of  past  contributions.  This  has  been  done  because  the  loan  was  a  protec- 
tion to  the  insurance  protection.  Nevertheless,  it  is  somewhat  inconsistent  for  the 
reason  that  it  recognizes  an  individual  interest  in  the  reserve  accumulation;  and  the 
practice,  from  a  legal  standpoint,  would  establish  the  right  to  individual  credit  and 
segregation.  The  possible  saving  of  the  protection  for  dependants  is  the  excuse  for  it. 

NoN-FoRFEiTABLE  means  that  a  policy  or  certificate  will  not  be  forfeited  or  cancelled 
after  two,  three  or  four  years,  as  the  provisions  may  be,  but  that  a  surrender  value 
is  given  in  the  way  of  paid-u/p  insurance  or  extended  insurance,  even  though  the  mem- 
ber make  no  application  for  such  a  surrender  value. 

INCONTESTABLE  means  that  a  policy  or  certificate  is  incontestable  when,  by  provisions 
and  conditions  of  the  contract,  payments  of  the  benefits  cannot  be  excluded  by  the 
company  or  society  for  any  cause,  except  the  non-payment  of  premiums  or  contribu- 
tions. 

LAPSE  in  life  insurance  means  the  termination  of  a  contract  and  forfeiture  of  the 
value;  that  is  of  the  accumulation  thereunder,  by  failure  to  make  contribution  within 
the  time  agreed.  Lapse  does  not  include  all  terminations  by  voluntary  withdrawal, 
before  the  end  of  the  period  of  protection ;  for  example — if  the  conditions  of  the  con- 
tract are  such  that  it  has  a  withdrawal  value  (that  is,  a  surrender  value)  and  the 
member  chooses  to  withdraw,  or  if  the)  contract  is  non-forfeitable  and  the  insurance 
company  or  society  must  by  the  terms  of  the  contract  give  a  surrender  value,  then  it 
is  not  correct  to  say  that  the  member  lapsed,  but  that  the  certificate  was  terminated 
by  "surrender."  Hence,  a  lapsed  contract  is  one  where  the  insurant  discontinues  con- 
tributions and  receives  no  surrender  value  but  forfeits  all  reserve  accumulation. 

EXPIRY  is  the  termination  of  an  insurance  contract  under  the  conditions  and  pro- 
visions of  the  insurance;  that  is  to  say,  if  the  member  has  a  term  contract  for  20 
years,  at  the  end  of  that  period,  the  contract  expires,  therefore,  its  termination  is  by 
"expiry." 

MATURITY  is  also  the  termination  of  a  contract  under  its  conditions  and  provisions ; 
as,  a  contract  promising  a  death  benefit  is  said  to  mature  when  it  becomes  a  claim  by 


240 

death,  or  an  endowment  contract  is  said  to  mature  at  the  end  of  the  endowment 
period  when  the  benefit  is  payable,  whether  payable  in  one  sum  or  by  instalments. 

VALUATION.  Since  the  first  paper  concerning  valuation  was  read  at  Detroit,  before 
the  National  Fraternal  Congress,  there  has  been  much  discussion  of  the  question. 

Some  have  construed  the  advocacy  of  valuation  into  a  contention  for  such  State 
supervision  as  would  turn  fraternal  orders  into  "old  line"  companies. 

When  the  question  is  properly  understood  this  fear  will  be  found  to  be  almost 
entirely  groundless. 

A  valuation  is  primarily  a  stock-taking,  and  its  object  is  to  give  information  as  to 
the  condition  of  the  business.  Only  incidentally  may  it  be  regarded  as  a  test  of 
solvency. 

In  he  business  of  life  insurance  the  assets  are  of  two  characters — property  and  cash 
in  actual  possession,  and  promised  receipts.  The  liabilities  are  promises  to  pay  definite 
amounts  upon  the  occurrence  of  certain  events,  or  at  the  expiration  of  certain  terms 
of  years. 

Valuation  is  the  process  of  comparing  the  liabilities  with  the  assets  in  order  to  find 
out  whether  they  balance  or  whether  there  is  an  excess  on  one  side  or  the  other.  As 
the  future  payments  are  due  at  various  dates,  the  balancing  process  must  be  brought 
to  some  definite  date,  and  the  time  at  which  the  valuation  is  begun  is  usually  chosen 
as  the  most  desirable  date. 

Of  course,  if  the  valuation  discloses  the  fact  that  the  present  value  of  the  benefits 
promised  is  in  excess  of  the  present  value  of  the  contributions  promised,  the  balance 
can  be  restored  by  the  assets  on  hand  in  the  form  of  cash,  Or  other  property  with  a 
cash  value. 

The  balance  can  also  be  restored  in  two  other  ways ;  fiirst,  by  increasing  the  value 
of  the  promised  contributions,  or  by  decreasing  the  value  of  the  promised  benefits. 

Only  in  case  the  latter  two  remedies  are  inadmissible  can  valuation  be  regarded  as 
a  test  of  solvency. 

That  it  is  so  regarded  today  in  the  case  of  "old  line"  companies  is  due  to  the  fact 
that  these  companies  are  limited  in  the  manner  just  described.  On  the  side  of  ben- 
efits they  have  contracted  to  pay  definite  amounts,  which  they  cannot  diminish.  On 
the  side  of  contributions  they  have  agreed  to  accept  in  full  definite  payments  at  definite 
periods,  and  these  they  cannot  increase,  either  in  size  or  frequency. 

It  is,  consequently,  essential  that  these  companies  should  be  able  to  show  upon 
valuation  that  they  have  on  hand  the  difference  between  the  present  value  of  benefits 
promised  and  the  present  value  of  contributions  promised. 

This  difference  is  known  as  the  net  or  legal  reserve,  when  the  net  premium  only 
is  used  in  estimating  the  present  value  of  promised  contributions. 

The  fact  that  this  difference,  or  reserve,  has  come  to  be  used  as  a  test  of  solvency 
for  insurance  companies  has  caused  its  importance  to  be  unduly  magnified,  until  the 
original  object  of  valuations  threatens  to  be  lost  sight  of. 

What  the  original  object  was  understood  to  be  in  this  country  is  indicated  by  the 
Massachusetts  statute  of  1852,  quoted  by  President  John  A.  McCall  in  his  address 
before  the  State  insurance  officials,  at  Columbus,  Ohio,  September,  1902.  The  form 
prescribed  by  this  act  required  two  items  to  be  stated,  viz. :  "Present  value  of  existing 
policies,"  and  "present  value  to  the  company  of  future  premiums  on  these  policies." 

Not  a  word  is  here  said  about  the  reserve,  as  it  was  not  then  used  as  a  test  of 
solvency. 

Similarly,  in  Great  Britain  the  same  method  of  valuation  is  used  when  Friendly 
Societies  are  in  question. 


241 

The  reason  is  not  difficult  to  find. 

Friendly  Societies,  on  the  other  side,  and  fraternal  orders  on  this  side  of  the 
Atlantic  are  not  confined  within  the  rigid  limits  of  "old  line"  companies,  but  enjoy  a 
much  more  flexible  premium  system. 

So  far  as  benefits  are  concerned  they  are  usually  as  little  able  as  "old  line"  com- 
panies to  diminish  them,  but  their  ability  to  increase  assessments,  either  in  number  or 
frequency,  is  practically  unlimited. 

It  is  not  necessary,  therefore,  for  these  societies  to  have  on  hand  the  entire  differ- 
ence between  the  promised  benefits  and  promised  contributions  at  existing  rates. 

A  valuation  of  one  of  these  societies  is  not  a  test  of  solvency,  but  rather  an  ex- 
ploration. 

Just  as  the  navigator  in  coastal  waters  heaves  the  lead  in  order  to  determine 
whether  or  not  there  is  any  danger  of  a  vessel's  going  aground,  so  the  fraternalist 
institutes  valuation  of  his  society  to  see  whether  it  needs  to  change  its  course  in  order 
to  avoid  the  shoals. 

If  he  finds  as  a  result  of  such  valuation  that  the  assets  in  hand  are  insufficient  to 
balance  the  difference  between  the  present  values  of  promised  benefits  and  promised 
contributions,  he  then  knows  that  it  will  be  necessary  to  increase  the  latter,  either  in 
size  or  frequency,  and  can  readily  estimate  the  amount  of  increase  required. 

We  find  an  excellent  illustration  of  this  method  in  a  little  pamphlet  entitled,  "Valua- 
tions of  Fraternal  Associations,"  by  Frederick  Gaston,  President  of  the  Grand  Fra- 
ternity, in  which  he  gives  the  items  concerning  a  suppositions  society.  The  present 
worth  of  future  liabilities  in  this  case  is  $1,061,648.76.  The  present  worth 
of  the  future  payments,  on  the  other  hand,  is  $1,017,033.01,  the  difference  being 
$44,615.75.  Now,  if  this  society  had  in  hand  $40,000,  being  $4,615.75  less  than  the 
required  reserve,  it  would  be  insolvent  by  the  legal  reserve  test,  and  yet  by  adding 
$4,000  to  the  present  value  of  the  future  payments,  this  technical  insolvency  could  be 
immediately  abolished.  But  $4,000  is  to  $1,000,000  as  I  is  to  250.  Therefore,  an.  addi- 
tion to  the  rates  of  one-two-hundred-and-fiftieth  part  would  restore  the  balance  be- 
tween the  value  of  future  benefits  and  future  contributions. 

From  this  example  it  must  be  so  evident  that  he  who  runs  may  read  that  it 
would  be  the  height  of  absurdity  to  apply  the  legal  reserve  test  of  solvency  to  a  fra- 
ternal order. 

And  yet  it  is  just  as  evident  that  valuation  is  as  important  to  a  fraternal  order  as 
to  an  "old  line"  company. 

The  operation  can  be  applied  to  any  society,  no  matter  what  its  plan. 

The  ordinary  fraternal  order  endeavors,  as  a  rule,  not  to  exceed  twelve  assessments 
annually.  Twelve,  in  fact,  may  be  called  the  normal  number,  and  twelve  times  the 
assessment  rate  may  be  considered  as  the  normal  annual  payment. 

If,  then,  in  any  such  society,  we  place  on  one  side  the  present  value  of  all  the 
insurance  "promised,  and  on  the  other  side  the  present  value  of  twelve  assessments 
annually,  we  will  obtain  a  difference  which  represents  the  amount  that  ought  to  be  on 
hand  to  make  the  contract  good  if  the  present  rates  are  to  continue. 

Or,  we  can  determine  from  this  same  lack  of  balance  what  increase  in  the  rates  is 
necessary  in  order  that  their  present  value  shall  equal  that  of  the  benefits. 

It  has  been  repeated  many  times  that  at  the  inception  of  the  contract  the  present 
value  of  the  benefit  secured  under  the  same  is  from  the  very  nature  of  the  case  exactly 
equal  to  the  present  value  of  the  contributions  expected  to  be  received. 

I  have  further  explained  that  in  the  course  of  operation  the  present  value  of  the 
benefit  increases  because  of  the  nearer  approach  to  maturity  of  the  contract. 


242 

In  other  words,  the  benefit  side  of  the  insurance  contract  has  an  increasing  value 
with  the  lapse  of  time  and  the  duration  of  membership. 

On  the  other  hand,  the  payment  side  of  the  insurance  contract  has  a  decreasing 
value  because  the  number,  of  premiums,  or  annual  or  monthly  contributions,  still 
remaining  to  be  paid  diminishes  with  every  payment,  and,  of  course,  the  present  value 
of  the  future  contributions  decreases  with  the  continuance  of  the  insurance  contract 
and  the  lapse  of  time  and  duration  of  membership. 

Obviously,  with  an  increasing  present  value  of  the  benefit  and  a  decreasing  present 
value  of  future  contributions  in  the  course  of  operation  the  present  value  of  the  ben- 
efits becomes  greater  than  the  present  value  of  future  expected  contributions. 

Under  the  explanation  of  the  reserve  I  have  stated  that  the  net  value  of  the  insur- 
ance contract  is  represented  by  this  reserve,  and  that  the  reserve  represents  the  differ- 
ence between  the  present  value  of  the  benefits  and  the  present  value  of  the  future  con- 
tributions at  any  given  date  after  the  issuance  of  the  contract. 

At  the  moment  the  contract  is  entered  into  the  present  value  of  the  promised 
benefit  is  just  equal  to  the  preesnt  value  of  the  future  contributions. 

Immediately  after  the  first  contribution  is  made,  then  there  is  a  difference  between 
the  present  value  of  the  promised  benefit  and  the  present  value  of  future  contributions. 
The  former  increasing  and  the  latter  diminishing  with  the  duration  of  the  contract, 
there  develops  a  net  value  to  the  insurance  contract  equal  to  the  difference  between 
the  present  value  of  the  promised  benefits  and  the  present  value  of  the  remaining 
contributions  to  be  received. 

At  tha  moment  the  insurance  contract  is  made  the  company  or  society  depends 
entirely  upon  the  future  contributions  in  order  to  provide  for  the  benefits  promised. 

Immediately  after  the  first  contribution  is  made  then  the  society  depends  upon  the 
remaining  contributions,  together  with  the  reserve  accumulation,  to  provide  for  the 
benefits  promised. 

In  other  words,  the  reserve  accumulation  supplements  the  future  contributions  to 
enable  the  society  or  company  to  carry  out  its  contract  to  pay  benefit. 

The  valuation  of  promised  benefits  and  future  contributions  is  a  forecast  of  the 
future  on  assumptions  that  future  mortality  will  correspond  with  or  be  not  higher 
than  represented  by  the  Mortality  Table  em-ployed  in  the  valuation,  and  that  future 
interest  earnings  on  investments  will  correspond  with  or  be  not  lower  than  the  interest 
rate  assumed. 

This  kind  of  valuation  is  known  as  a  "Prospective  Valuation" — undertaking  as  it 
does  to  set  forth  future  prospects. 

In  my  opinion  a  Prospective  Valuation  is  much  more  suitable  for  life  insurance 
companies  than  for  fraternal  beneficiary  societies,  considering  the  present  situation 
of  the  two  kinds  of  organizations.  At  least,  this  character  of  valuation  is  not  suitable 
for  many  societies  and  for  a  portion  of  the  business  of  many  others. 

The  contribution  rates  for  the  entire  business  of  many  societies  are  inadequate  to 
provide  for  the  promised  benefits,  when  the  latter  are  construed  to  fix  the  character 
of  the  contract.  The  same  is  true  of  large  portions  of  the  business  of  many  other 
societies. 

For  example,  in  the  certificate  it  is  promised  that  a  designated  sum  will  be  paid  on 
proof  of  death  of  the  member.  In  another  certificate  it  is  promised  that  a  designated 
sum  will  be  'paid  on  the  death  of  the  member  prior  to  age  70,  or  the  principal  sum 
will  be  paid  in  ten  equal  annual  instalments,  the  first  payment  beginning  at  age  70. 

The  Benefit  Side  of  the  first  certificate  undoubtedly  conforms  to  a  whole  life 
contract  for  death  benefit  payable  whenever  that  event  occur,  and  the  present  value  of 
such  a  benefit  is  represented  by 


243 

Ax=Singlc  Premium,  which  would  be  employed  in  the  Prospective  Valuation. 

The  Benefit  Side  of  the  second  certificate  undoubtedly  conforms  in  promises  to  a 
contract  for  an  instalment  endowment  at  age  70,  or  prior  death  benefit,  and  is  repre- 
sented by 

AEx:  70— x|  =  Single  Premium,  which  would  be  employed  in  the  Prospective  Valuation 
of  such  a  benefit 

When  the  future  expected  contributions,  "as  in  practice  acutally  collected,"  are 
valuated  by  corresponding  Single  Premiums  for  whole  life  and  temporary  annuities, 
the  resulting  values,  for  very  many  societies,  range  from  30  per  cent  to  85  per  cent  of 
the  values  obtained  for  the  promised  benefits;  while  the  accumulated  funds  will  range 
from  nothing  to  10  per  cent  or  15  per  cent  of  the  value  of  promised  benefits. 

It  is  the  exception  when  the  present  value  of  future  expected  contributions  ("as 
in  practice  actually  collected")  plus  the  accumulated  funds  will  equal  the  present  value 
of  promised  benefits. 

Consequently,  under  a  Prospective  Valuation  the  degree  of  solvency  is  shown  as 
low  as  30  per  cent  and  seldom  100  per  cent. 

Complaint  is  immediately  made  of  the  injustice  in  such  an  exhibit,  because  by  such 
the  construction  of  the  Payment  Side  of  the  contract  it  is  not  completely  valued  when 
assuming  that  the  future  contributions  are  represented  by  those  "as  in  practice  ac- 
tually collected"  at  the  date  of  valuation. 

It  is  shown  that  the  society  has  the  reserved  right  to>  levy  extra  assessments,  and 
that  the  legality  of  the  exercise  of  this  right  has  been  sustained  by  court  decisions 
whenever  made  an  issue. 

It  is  claimed  that  a  present  value  should  be  given  to  the  future  contributions  which 
may  be  collected  under  this  reserved  right. 

It  is  argued  that  the  right  to  levy  extra  assessments  is  not  restricted,  nor  the  num- 
ber limited,  and,  therefore,  the  value  of  future  extra  assessments  should  equal  the 
difference  between  the  value  of  the  promised  benefits  and  the  accumulated  funds 
(if  any)  plus  the  present  value  of  the  future  contributions  on  the  basis  of  those  "as 
in  practice  actually  collected"  at  date  of  valuation. 

This  argument  is  supplemented  by  the  statement  that  the  members  declare  and 
assert  their  willingness  to  pay  extra  assessments  when  needed.  This  statement  is 
supported  by  reference  to  the  fact  that  members  resist  an  increase  in  rates  of  con- 
tribution on  the  ground  that  their  contracts  were  made  upon  a  level  rate  basis,  with 
a  provision  for  the  call  of  extra  assessments  when  needed,  and  that  they  want  to 
abide  by  the  letter  of  their  contracts. 

It  would  be  subversive  of  the  fundamental  principles  of  prospective  valuation  to 
assign  a  present  money  value  to  deferred  contributions  which  might  be  collected 
under  a  latent  right  to  demand  future  assessments. 

If  there  were  any  present  assurance  that  future  extra  payments  would  be  made 
when  demanded,  their  present  value  might  be  considered. 

Ample  experience  can  be  produced  to  show  that  reliance  cannot  be  placed  in  the 
payments  of  extra  assessments  as  a  substitute  for  increased  assessments.  The  levy  of 
extra  assessments  to  supplement  regular  assessments  has  put  many  societies  out  of 
business,  because  of  lack  of  response  to  the  call. 

The  only  practical  use  of  the  reserved  right  to  levy  extra  assessments  is  to  raise 
a  fund  to  make  good  some  impairment  in  the  reserve,  or  to  meet  some  emergency 
not  contemplated  in  the  computation  of  contribution  rates  that  would  be  adequate 
under  normal  conditions.  As  hereinbefore  explained  the  value  of  the  reserved  right 
to  levy  extra  assessments  cannot  be  greater  than  a  required  extra  surplus  or  "buffer" 
fund  under  a  "fixed"  premium  system  of  insurance. 


244 

Notwithstanding  it  is  impractical,  if  not  impossible,  to  assign  a  present  money 
value  of  any  degree  to  the  reserved  right  to  levy  future  extra  assessments,  neverthe- 
less there  is  matter  for  serious  consideration  in  the  presentation  concerning  the  unques- 
tioned attitude  of  members  in  respect  of  increase  in  rates  of  assessment,  and  in  regard 
to  their  declarations  about  a  willingness  to  pay  extra  assessments  "when  needed." 

A  valuation  exhibit  that  shows  30  per  cent  of  solvency  is  an  absurdity.  One  that 
shows  70  per  cent  of  solvency  discloses  an  impossible  condition  in  so  far  as  ultimate 
solvency  is  to  be  attained  without  increased  rates  or  decreased  benefits. 

The  publication  of  such  exhibits  brings  valuation  into  disrepute  and  ridicule 
amongst  the  members  of  the  societies. 

They  sneer  at  the  idea  of  a  society  being  one  hundred  and  fifty  millions  of  dollars 
deficient  when  it  has  fifteen  millions  in  actual  accumulated  funds — or  that  there  is  a 
deficiency  of  $20,000,000  when  the  society  is  possessed  of  $2,000,000  invested  in  good 
securities. 

There  is  so  much  ignorance  in  regard  to  the  liability  assumed  in  the  promise  to 
pay  benefits  at  the  death  of  members,  that  no  general  conception  can  be  formed  of 
the  present  money  value  of  such  promises.  Logically,  there  can  be  no  concrete  idea 
of  the  present  value  of  future  contributions  to  meet  future  obligations. 

The  outcome  is  that  only  ridicule  or  indifference  follows  the  presentation  of  an 
exhibit  which  shows  a  difference  of  millions  of  dollars  between  the  present  value  of 
expected  future  claims  and  the  present  value  of  expected  future  contributions. 

Absolutely  nothing  is  accomplished  by  such  a  prospective  valuation  in  way  of 
educating  the  members  or  causing  them  to  realize  the  technically  insolvent  position 
of  their  organization. 

However  much  the  officials  may  appreciate  the  valuation  results,  they  are  unable 
to  stir  the  membership  to  reformative  action  by  publication  of  the  exhibit  of  deficiency. 

It  is  of  public  knowledge  thatf  many  unsuccessful  efforts  have  been  made  to  secure 
reforms  and  readjustments  by  the  broadcast  publication  of  valuation  deficiencies. 

It  appears  equally  barren  of  practical  accomplishment  to  make  known  valuation 
deficiencies  under  the  sanction  of  law. 

The  aim  should  be  to  obtain  practical  results  from  valuation  publicity. 

Little  appears  to  be  accomplished  by  the  publication  of  results  from  Prospective 
Valuations  where  large  deficiencies  are  exhibited. 

After  years  of  study  I  have  reached  the  conclusion  that  the  best  method  is  to 
make  a  Retrospective  Valuation  of  certificates  with  rates  not  adequate  for  the  benefits 
promised  when  construed  from  the  Benefit  Side  of  the  contracts. 

And  there  should  follow  the  valuation  exhibit  requests  for  extra  contributions 
from  those  who  were  shown  to  be  creating  deficiencies. 

This  method  would  test  immediately  the  sincerity  of  the  declared  willingness  to 
pay  extra  assessments  when  needed. 

The  Retrospective  Valuation  would  clearly  indicate  the  need  of  extra  contributions 
and  from  whom  they  should  be  required. 

Even  though  extra  assessments  were  not  levied  until  all  accumulation  was  ex- 
hausted, nevertheless  the  retrospective  valuation  would  disclose  actual  instead  of 
expected  conditions,  and  the  members  could  see  for  themselves  who  were  and  who 
were  not  paying  their  share  of  the  maturing  claims,  and  could  see  who  were  creating 
deficiencies  and  thereby  consuming  the  accumulated  funds. 

As  an  object  lesson  and  for  educational  purposes  nothing  could  be  better  than  an 
exhibit  of  the  results  of  a  Retrospective  Valuation. 

It  is  a  valuation  which  gives  the  results  of  past  operation  up  to  the  date  of  valua- 
tion. 


245 

It  shows  to  the  members  the  accumulated  value  of  all  the  past  benefits  which  have 
been  paid  and  the  accumulated  value  of  all  past  contributions,  and  whether  or  not  the 
member's  past  contributions  have  been  more  or  less  than  his  share  in  the  payment  of 
claims — it  shows  whether  or  not  he  has  paid  more  or  less  than  the  equitable  cost  for 
the  protection  granted  to  him. 

RESERVE  VALUES  which  are  ordinarily  published  are  the  terminal  reserves,  and,  as 
stated,  these  would  be  useful  for  making  a  valuation  by  policy  years ;  that  is,  by  taking 
the  value  at  the  end  of  the  policy  years.  In  practice,  however,  the  valuations  are 
made  by  the  calendar  years,  and  the  modified  terminal  reserves  are  known  as  "mean" 
or  "midyear"  reserves. 

When  premiums  or  contributions  are  paid  annually  in  advance  the  "mean"  or 
"midyear"  reserves  ordinarily  are  obtained  from  the  terminal  reserves  by  taking  one- 
half  of  the  sum  of  the  annual  premiums  and  terminal  reserves  of  the  preceding  and 
current  years  of  valuation. 

Thus  for  age  35  on  a  whole  life  policy  or  contract  the  premium  is  $16.62  and  the 
reserve  at  the  end  of  the  first  year  is  $11.20;  adding  these  together  and  dividing  by 
two  we  have  the  mean  reserve  in  the  first  year  of  $13.91. 

The  initial  reserve  for  the  second  year  is  $16.62  plus  the  reserve  of  $11.20  at  the 
end  of  the  first  year,  or  $27.82. 

The  initial  reserve  of  $27.82  at  the  beginning  of  the  second  year  plus  the  reserve 
at  the  end  of  the  second  year  equals  $50.58,  which  divided  by  2  gives  $25.29  as  the 
mean  reserve  for  the  second  year. 

When  the  contribution  is  made  annually  in  advance  the  mean  or  midyear  reserve 
is  greater  than  the  terminal  reserve.  For  example,  the  terminal  reserve  at  the  end 
of  the  first  year  is  $11.20,  while  the  mean  reserve  is  $13.91.  The  terminal  reserve  at 
the  end  of  the  second  year  is  $22.76,  while  the  mean  reserve  is  $25.29.  This  is  due 
to  the  fact  that  the  premium  is  paid  in  the  beginning  of  the  year,  and  is  supposed  to  be 
diminished  by  the"  payment  of  claims  during  the  year,  so  that  at  the  end  of  the  year 
a  larger  amount  of  the  premiums  and  reserves  would  be  used  for  the  payment  of 
claims. 

The  premium  of  $16.62  in  the  beginn;ng  of  the  first  year  is  called  the  initial  reserve. 
Likewise  the  $50.58  is  the  initial  reserve  at  the  beginning  of  the  second  year. 

It  is  seen  that  the  amount  of  the  annual  premiums  plus  the  reserve  at  the  end  of 
the  year  is  the  initial  reserve  at  the  beginning  of  the  following  year.  Therefore,  we 
have  the  initial  reserve,  the  mean  reserve  and  the  terminal  reserve. 

The  terminal  reserve  is  used  in  the  valuation  by  policy  years  and  is  also  used  in 
the  determination  of  the  single  premium  for  the  purchase  of  paid-up  insurance,  ex- 
tended insurance,  loans  or  cash  surrender  value. 

If  premiums  are  paid  monthly  in  advance  on  the  first  day  of  the  month,  the  mean 
reserve  would  be  found  by  taking  one-half  of  the  sum  of  the  monthly  contributions 
and  terminal  reserve  of  the  preceding  and  current  month,  if  we  followed  the  method 
of  obtaining  the  mean  reserves  when  the  premium  is  payable  annually  in  advance. 

However,  in  practice  the  premiums  are  due  and  payable  on  a  fixed  day  in  each 
month,  and  the  better  approximation  of  the  mean  reserve  is  obtained  by  taking  one- 
half  of  the  sum  of  the  terminal  reserves  for  the  preceding  and  current  years  of  valua- 
tion. In  the  words  of  the  text-book  : 

"The  value  of  the  policy  is  the  sum  which  the  insurance  society  or  company  must 
have  in  hand  to  provide  for  that  portion  of  the  liabilities  under  the  contract,  which 
future  premiums  will  not  cover,  and  the  only  source  from  which  it  can  be  derived  is 


246 

the  accumulation  of  the  balance  of  past  premiums,  not  absorbed  by  the  risks  already 
incurred." 

The  valuation  is  the  determination  of  the  amount  of  the  reserve  accumulation 
required  to  supplement  future  contributions  in  order  to  enable  the  society  or  com- 
pany to  fulfill  its  promise. 

The  valuations  may  be  made  by  employing  the  net  reserve  values;  that  is  to  say, 
the  reserve  values  on  the  basis  of  $1,000  may  be  worked  out  in  advance,  and  be  used 
for  the  valuation  of  any  amount  of  protection  by  employing  the  reserve  values  for 
the  age  of  entry  and  the  duration  as  the  multiplier  for  the  amount  of  protection 
for  the  same  age  of  entry  and  year  of  duration. 

For  example,  the  reserve  accumulation  at  the  end  of  the  fifth  year  on  a  whole  life 
certificate,  the  National  Fraternal  Congress  Table  of  Mortality  and  4  per  cent  interest 
on  $1,000  is  $59.62.  Now,  if  at  the  end  of  the  fifth  year,  we  had  $100,000  of  protection 
on  members  at  age  35,  we  would  multiply  the  $100,000  by  the  $59.62  (or  rather  we 
would  multiply  the  $59.62  by  100,  because  fhe  $59.62  is  the  amount  of  reserve  at  the 
end  of  the  fifth  year  for  entry  age  35  on  $1,000  of  whole  life  certificate).  Conse- 
quently on  $100,000  we  would  have  100  times  $59.62,  which  would  give  us  a  reserve 
of  $5,962. 

However,  the  $59.62  is  the  terminal  reserve;  that  is  to  say  it  is  the  amount  accu- 
mulated at  the  end  of  the  fifth  policy  year.  If  the  valuation  were  made  by  the  use  of 
terminal  reserve  values,  then  the  certificate  or  policy  must  be  valued  at  the  end  of  the 
certificate  or  policy  year.  This  date  might  be  in  any  month  or  any  day  of  any  month 
in  the  year.  Contracts  are  issued  throughout  the  month  of  each  year,  and  conse- 
quently, in  making  a  terminal  reserve  valuation  the  date  of  issue  must  be  known  in 
order  to  have  the  valuation  to  end  on  the  anniversary  of  the  issuance  of  the  contract. 

Such  a  valuation  would  be  impractical,  and  therefore,  the  law  permits  and  the 
practice  is  to  make  valuations  as  if  contracts  were  issued  at  the  middle  of  the  year, 
because,  on  the  average,  policies  or  certificates  have  been  issued  all  through  the  year 
and  therefore  have  an  average  duration  of  six  months. 

At  the  end  of  the  year — that  is  to  say,  on  December  31  of  any  year — it  is  assumed 
that  all  of  the  policies  or  certificates  outstanding  at  that  date  and  issued  during  the 
current  year  have  a  duration  of  six  months ;  and  all  policies  issued  in  the  previous 
year  have  a  duration  of  one  year  and  six  months ;  and  similarly  for  other  years  of 
issue.  Therefore,  to  make  a  valuation  on  the  basis  of  duration  of  one-half  a  year, 
one  year  and  a  half,  two  years  and  a  half,  etc.,  the  terminal  reserve  values  must  be 
modified,  as  before  indicated,  by  conversion  into  "mean"  or  "midyear"  reserves. 

If  the  valuation  is  made  by  single  premiums  and  annuities  these  must  be  modified 
to  give  "mean"  or  "midyear"  values. 

Likewise  if  the  valuation  be  on  the  "accumulation  basis"  there  must  be  a  modifica- 
tion of  the  accumulation  factors  to  produce  results,  as  of  one  half  a  year,  one  year 
and  a  half,  etc. 

SURPLUS  is  the  excess  of  assets  over  liabilities. 

ASSETS  of  a  life  insurance  company  consist  of  the  available  securities  and  other 
property  and  the  present  value  of  expected  future  contributions.  The  available  prop- 
erty makes  up  the  actual  assets  of  the  company  or  society.  The  expected  future  con- 
tributions receivable  make  up  the  prospective  assets  of  the  company  or  the  society. 
The  prospective  assets  are  of  the  nature  of  bills  receivable,  being  composed  of  the 
promised  contributions  expected  to  be  received  from  the  members.  Only  within  the 
last  two  years  have  fraternal  societies  been  compelled  to  report  prospective  assets; 


247 

that  is,  the  present  value  of  the  future  contributions  expected  to  be  received.  Here- 
tofore, they  were  only  required  to  report  the  available  or  actual  assets. 

LIABILITIES  of  a  life  insurance  company  or  society  are  the  matured  debts  and  claims 
of  every  character  and  the  present  value  of  the  promised  benefits.  Assumed  and 
matured  debts  and  claims  are  called  the  actual  liabilities,  while  the  present  value  of 
the  promised  benefits  are  known  as  the  prospective  liabilities.  The  latter  are  of  the 
nature  of  bills  payable.  The  actual  liabilities  consist  of  claims  reported,  approved  and 
unpaid,  or  existing,  or  in  course  of  approval,  and  also  the  amount  that  is  due  to 
different  parties  whether  for  expenses  or  otherwise,  and  the  net  value  of  the  outstand- 
ing certificates.  This  net  value  is  known  and  heretofore  explained  as  the  reserve 
accumulation,  or  the  required  accumulation  to  maintain  the  integrity  of  the  insurance 
contract.  If  the  total  actual  and  prospective  assets  are  in  excess  of  the  actual  net 
claims  and  reserve  liabilities,  the  balance  is  called  surplus,  which  is  available  for 
apportionment  or  distribution  or  appropriation,  as  may  be  determined  by  the  manage- 
ment of  the  life  insurance  company  or  by  the  rules  of  the  fraternal  beneficiary  society. 

DIVIDENDS  are  the  amounts  distributed  to  policy-holders  from  the  surplus  or  the 
amount  paid  to  stockholders  of  stock  companies  from  the  surplus.  Dividends  to  policy- 
holders  of  life  companies  are  not  always  paid  in  cash,  but  are  sometimes  paid  in  the 
way  of  extended  or  paid-up  insurance;  usually  in  the  way  of  paid-up  insurance,  and 
which  latter,  being  purchased  with  the  dividends,  is  added  to  the  face  of  the  policy, 
and  has  been  called  Reversionary  Addition.  Dividends  to  policy-holders  are  only  paid 
upon  participating  policies  or  contracts.  The  contracts  upon  which  no  dividends  are 
paid  are  called  non-participating  policies. 

STOCK  Companies  are  those  which  are  controlled  by  stockholders  who  own  the 
capital  stock  and  in  which  policy-holders  have  no  voice  or  vote. 

MIXED  Companies  are  those  which  have  stockholders  who  jointly  act  with  policy- 
holders  to  control  the  management  of  the  companies. 

MUTUAL  Companies  are  those  which  are  controlled  by  the  policy-holders;  at  least, 
they  have  no  stockholders  and  the  policy-holders  theoretically  control  the  management. 

RENEWAL  PREMIUMS  are  the  premiums  or  contributions  made  after  the  first 
payment. 

PRESENT  VALUE  is  the  amount  which  a  sum  due  at  a  future  date  would  be  worth 
now,  at  an  agreed  rate  of  interest. 

ACTUAL  MORTALITY  is  the  death  rate  actually  experienced  by  a  company  or  society. 

EXPECTED  MORTALITY  is  the  death  rate  according  to  some  standard  table  of  mor- 
tality. 

ADVERSE  SELECTION  usually  occurs  in  connection  with  unfavorable  mortality,  but 
generally  it  is  the  exercise  of  privileges  and  options  by  the  members  which  are  to  the 
disadvantage  of  the  society  or  company.  In  readjustments  of  contribution  rates  there 
are  always  large  withdrawals,  and  when  the  withdrawals  are  of  good  lives,  and  the 
impaired  lives  remain,  this  is  called  adverse  selection,  since  the  company  or  society 
can  not  prevent  the  withdrawals  of  good  lives  nor  the  retention  of  the  impaired  lives. 
Adverse  selection  also  results  when  members  are  taken  on  low  rates  of  contribution 
to  be  increased  or  renewed  at  the  end  of  a  term  or  designated  age  at  a  higher  rate. 
Many  members  on  attaining  to  the  age  or  to  the  end  of  the  period  for  the  low  rate 
of  contribution  will  not  pay  the  higher  rate  and  continue  the  protection,  but  will  lapse. 
Usually  these  are  good  lives,  while  all  impaired  lives  will  continue  the  protection  at 
the  higher  rate;  therefore,  there  is  an  adverse  selection  against  the  society  or  com- 
pany. 


248 

GROUP  INSURANCE  is  thus  described  by  Mr.  Henry  Moir: 

"In  1911  bills  were  introduced  in  several  State  legislatures  to  authorize  companies 
to  accept  groups  of  men  for  life  insurance  without  medical  examination,  and  to  make 
it  clear  that  this  would  not  constitute  an  unjust  discrimination.  Such  laws  passed  in 
one  or  two  States  and  failed  of  passage  in  others.  They  facilitate  and  give  legal 
sanction  to  plans  for  the  assurance  of  working  men  by  manufacturers  and  others  who 
employ  many  men.  When  the  plan  is  compulsory  on  the  workmen,  it  is  generally  best 
that  the  employer  should  pay  the  premium  or  give  what  is  nearly  its  equivalent, 
namely,  an  increased  salary  enough  to  meet  the  premium  with  the  stipulation  that  the 
premium  be  deducted  from  the  wages.  When  the  plan  is  not  compulsory  on  all,  a 
medical  examination  is  essential  for  the  due  protection  of  the  company.  New  employes 
are  usually  subject  to  examination  in  any  case.  As  an  encouragement  to  thrift  and 
an  inducement  to  a  contented  spirit  amongst  workmen  the  plan  is  to  be  warmly  com- 
mended. To  make  it  completely  satisfying  it  should  be  accompanied  or  supplemented 
by  a  pension  fund  providing  for  the  old  age  of  those  wrorkmen  who  survive.  Several 
large  groups  have  been  accepted  on  yearly  renewable  term  plans,  thus  furnishing  pro- 
tection without  accumulating  large  reserve  funds.  Since  the  average  age  of  a  group 
of  workmen  remains  approximately  the  same  from  year  to  year,  the  older  men  who 
die  or  drop  out  being  replaced  by  young  men,  the  total  premiums  to  be  paid  by  the 
employer  would  remain  about  the  same.  But  if  a  business  should  begin  to  fall  off, 
the  average  age  of  the  men  will  tend  to  increase,  meaning  an  increase  of  the  pre- 
miums just  at  the  time  when  the  business  is  least  able  to  meet  this  expense.  Some 
firms  and  corporations  prefer  a  plan  of  endowment  insurance,  maturing  at  an  advanced 
age,  as  60  or  65,  and  there  is  much  to  commend  this  form  of  policy  for  the  purposes 
in  view." 

The  group  insurance  plan  of  the  life  insurance  companies  has  been  opposed  by 
the  fraternal  beneficiary  societies,  and  at  the  meetings  of  the  Associated  Fraternities 
and  the  National  Fraternal  Congress  in  1912,  when  the  organizations  were  consol- 
idated, there  were  resolutions  passed  condemning  this  kind  of  insurance,  and  the  legis- 
lative committee  of  the  Consolidated  Congress  was  authorized  to  take  such  action 
as  would  prevent  legislation  favoring  group  insurance  which  might  be  to  the  disad- 
vantage of  the  fraternal  beneficiary  societies.  The  opposition  of  the  fraternal  socie- 
ties was  aroused  by  the  fact  that  one  company,  at  least,  undertook  to  insure  as  a 
group  the  lodges  of  a  society  in  the  State  of  Michigan.  By  this  action  a  prejudice 
was  raised  against  group  insurance,  and  it  was  largely  due  to  this  opposition  that  the 
life  insurance  companies  failed  to  secure  favorable  legislation  in  the  States,  with  the 
exception  of  two  or  three,  or  possibly  four,  up  to  the  date  of  this  writing. 

Under  proper  regulations  and  restrictions  group  insurance  might  be  of  great  ad- 
vantage of  the  workingman. 

The  trouble  appears  to  be  that  proper  supervision  and  regulation  are  not  possible 
under  existing  conditions  of  disagreement. 

Only  a  few  companies  (and  no  societies)  are  writing  "Group"  insurance,  and  these 
have  different  plans. 

A  very  large  number  of  the  life  companies  and  practically  all  of  the  fraternal 
societies  oppose  or  do  not  care  for  this  method  of  getting  business. 

Not  exceeding  half  a  dozen  States  (to  March,  1914)  have  laws  directly  providing 
for  group  insurance,  but  the  business  can  be  done  in  upwards  of  thirty  States  by 
permission  of  Insurance  Commissioners. 

The  Executive  Committee  of  the  National  Fraternal  Congress  of  America  has 
adopted  an  unconditional  resolution  in  opposition  to  group  insurance  and  instructed 


249 

its  Committee  on  Statutory  Legislation  to  attempt  the  defeat  of  any  bills  which  may 
be  introduced  in  any  of  the  States  favorable  to  group  insurance. 

The  position  of  unqualified  opposition  is  taken  mainly  on  the  ground  that  to 
permit  life  companies  to  write  group  insurance  would  be  to  allow  them  to  invade  the 
field  heretofore  considered  the  exclusive  pasture  for  fraternals. 

The  particular  reason  for  opposition  is  the  character  of  policies  which  are  being 
written  by  the  life  companies,  and  the  danger  of  "switching"  entire  lodges  from  the 
societies. 

The  Insurance  Commissioners  have  declared  themselves  against  the  latter,  and  the 
companies  proclaim  that  they  have  no  intention  of  making  any  effort  to  "switch," 
or  even  solicit  the  wholesale  transfer  of  local  bodies.  Nevertheless,  the  fraternal 
officials  are  firmly  convinced  that  the  opportunity  would  exist,  and  they  fear  to  trust 
their  "ancient  enemy''  with  such  power. 

The  question  will  finally  be  settled — as  all  questions  of  a  public  character  are 
settled — upon  the  determination  of  public  utility. 

The  people  will  not  deny  themselves  of  an  advantage,  because  one  corporation 
can  and  another  can  not  give  the  service.  Neither  will  the  people  forego  a  general 
benefit  in  order  to  protect  the  business  of  any  public  service  corporation. 

The  present  situation  is  not  now  affected  by  popular  attention.  It  is  a  contest 
between  corporations  which  favor  and  oppose  a  particular  method  of  securing  business. 

What  decision  the  people  would  render  is  problematical. 

As  heretofore  stated,  it  appears  that  the  public  might  be  benefited  by  group  insur- 
ance, under  proper  restrictions,  regulations  and  supervision. 

The  objectionable  feature  under  present  methods  is  the  elimination  of  the  indi- 
vidual 

The  employer  and  the  life  or  casualty  company  come  to  an  understanding  and 
straightway  announcement  is  made  to  the  employes  that  a  condition  of  their  employ- 
ment is  that  they  be  insured  according  to  the  scheme  arranged  for  them.  And  that 
if  they  quit  the  service  of  the  employer,  or  should  he  discharge,  their  insurance  ceases. 

This  is  a  character  of  "beneficent"  interference  with  individual  rights  and  privileges 
not  conducive  to  that  sort  of  independence  for  which  Americanism  stands. 

It  is  an  utter  impossibility  to  formulate  one  scheme  of  insurance  for  a  group  of 
persons  and  have  the  single  plan  best  for  each  individual  of  the  group. 

It  is  a  denial  of  unrestrained  liberty  when  the  individual  is  compelled  by  force  of 
circumstances  to  accept  something  inferior  to  what  he  could  obtain  if  left  to  his  own 
selection. 

There  are  objections  to  the  present  methods  of  writing  group  insurance,  because 
of  the  misconception  of  its  real  character  by  those  who  are  insured. 

Again  it  is  objectionable  because  of  the  opportunity  given  to  the  employer  to 
unduly  control  the  employes. 

A  case  in  point :  A  person  has  been  employed  at  a  wage  of  $1,000  a  year  for  ten 
years.  He  has  a  valuable  interest  in  his  insurance.  He  has  an  offer  (because  of  his 
skill  from  ten  years'  experience)  of  $1,200  a  year.  If  he  accepts  the  better  position 
he  loses  his  interest  in  the  insurance.  The  present  employer  has  an  advantage  gained 
from  past  contributions  of  his  employe  (in  part  at  least)  which  is  not  to  be  com- 
mended. 

The  position  of  an  employe  should  not  be  prejudiced  by  any  scheme  of  group  insur- 
ance, and  he  should  be  left  free  to  accept  or  reject  any  plan  offered. 

If  laws  are  enacted  that  will  permit  the  writing  of  group  insurance,  all  insurance 
organizations  should  be  included.  There  should  be  no  discrimination  between  com- 
panies and  fraternal  societies,  as  under  the  practice  where  the  business  is  written  by 


250 

permission  of  commissioners.  And  always  the  employe  should  be  left  free  to  accept 
or  reject  any  group  insurance  scheme  without  prejudice  to  his  employment,  and  he 
should  be  given  an  election  as  to  the  kind  of  policy  for  his  insurance,  and  whether  or 
not  it  terminated  with  his  employment 

ANNUITY  is  a  stated  sum  of  money  which  is  to  be  paid  yearly. 

ANNUITANT  is  the  one  to  whom  the  annuity  is  payable. 

LIFE  ANNUITY  is  one  which  terminates  on  the  death  of  the  annuitant. 

PERPETUAL  ANNUITY  is  one  that  is  to  be  paid  yearly  or  periodically  for  an  unlim- 
ited number  of  years. 

TEMPORARY  ANNUITY  is  one  which  terminates  after  a  specified  number  of  years. 

CONTINGENT  ANNUITY  is  one  that  terminates  on  the  happening  of  some  stated  future 
event,  as  at  the  death  of  a  designated  person,  or  at  the  end  of  a  number  of  years  after 
the  end  of  a  designated  period.  The  event  may  be  one  that  must  occur,  or  one  that 
may  never  occur,  so  that  it  is  possible  for  a  contingent  annuity  to  be  perpetual. 

DEFERRED  ANNUITY  is  one  the  yearly  payments  of  which  do  not  commence  until 
some  future  date,  or  the  happening  of  some  future  event. 

JOINT  ANNUITY  is  one  to  be  paid  so  long  as  both  or  all  of  two  or  more  lives  con- 
tinue to  exist. 

ANNUITY  ON  THE  LAST  SURVIVOR  is  an  annuity  to  be  paid  so  long  as  either  or  any 
one  of  two  or  more  lives  shall  continue  to  exist. 

SURVIVORSHIP  ANNUITY  is  to  be  paid  to  a  person  termed  the  nominee,  provided  he 
survives  a  designated  person  who  is  termed  the  insured. 

AMORTIZATION  OF  BONDS.  In  a  number  of  States  the  laws  provide  for  a  valuation 
of  securities  by  the  method  known  as  Amortization.  The  law  of  New  York  State 
reads  as  follows : 

"All  bonds  or  other  evidences  of  debt  held  by  a  life  insurance  corporation,  author- 
ized to  do  business  in  this  State,  shall,  if  amply  secured  and  if  not  in  default  as  to 
principle  and  interest,  be  valued  as  follows:  If  purchased  at  par,  at  the  par  value;  if 
purchased  above,  or  below  par,  on  the  basis  of  the  purchase  price,  adjusted  so  as  to 
bring  the  value  to  par  at  maturity,  and  so  as  to  yield  in  the  meantime  the  effective 
rate  of  interest  at  which  the  purchase  was  made,  provided  that  the  purchase  price 
shall  in  no  case  be  taken  at  a  higher  figure  than  the  actual  market  value  at  the  time 
of  purchase,  and  provided  further  that  the  Superintendent  of  Insurance  shall  have 
full  discretion  in  determining  the  method  of  calculating  values  according  to  the  fore- 
going rules,  and  the  values  found  by  him  in  accordance  with  such  method  shall  be 
final  and  binding;  provided  also  that  any  such  corporation  shall  return  such  bond  or 
other  evidences  of  debt  at  their  market  value  or  their  book  value,  but  in  no  event  at 
an  aggregate  value  exceeding  the  aggregate  of  the  values  calculated  according  to  the 
foregoing  rule.  The  Superintendent  of  Insurance  may  at  any  time,  in  his  discretion, 
require  any  insurance  corporation,  other  than  a  life  insurance  corporation,  authorized 
to  do  business  in  this  State,  to  value  its  bonds  or  other  evidences  of  debt  in  accordance 
with  the  foregoing  rule." 

In  commenting  upon  this  law,  Mr.  Moir  said : 

"It  should  be  noted  that  this  method  of  valuation  does  not  apply  to  debts  which 
are  not  amply  secured,  nor  to  bonds  which  may  be  in  default  as  to  principle  or  inter- 
est. It  means  generally  that  securities  may  be  valued  on  the  original  basis  on  which 


251 

they  were  bought,  and  if  a  bond  were  purchased  so  as  to  yield  4^  per  cent  interest, 
then  it  may  be  taken  throughout  its  entire  duration  as  yielding  this  interest,  whether 
the  rate  of  interest  should  move  upwards  or  downwards.  For  a  life  insurance  company 
whose  obligations  extend  for  50  or  60  years,  the  system  is  to  be  highly  commended." 

LEGAL  RESERVE.  Many  persons  confuse  legal  reserve  with  mathematical  reserve. 
The  error  is  due  to  the  fact  that  in  almost  all  of  the  States  life  insurance  companies 
are  required  to  maintain  a  reserve  accumulation  according  to  some  standard  mortality 
table.  From  the  fact  that  this  reserve  is  required  by  law,  it  got  its  name  of  "Legal 
Reserve,"  and  Life  Insurance  Companies  became  known  as  "Legal  Reserve  Companies." 
The  laws  which  require  reserve  accumulation  are  called  valuation  laws  from  the  fact 
that  the  legal  reserve,  or  the  reserve  accumulation,  can  be  determined  only  by  a 
valuation,  and  since  the  laws  require  that  the  net  value  of  the  certificates  or  policies, 
should  be  reported,  they  are  known  as  net  valuation  law,s.  The  laws  recently  enacted 
for  the  valuation  of  the  certificates  of  fraternal  beneficiary  societies  do  not  confine  the 
^alue  to  the  net  reserve,  but  the  Societies  are  permitted  to  report  the  present  value 
of  the  promised  benefits  and  the  present  value  of  the  future  contributions  as  in  prac- 
tice actually  collected.  In  more  recent  enactments  it  is  also  provided  that  the  Societies 
may  value  their  certificates  on  what  has  been  designated  "accumulation  basis."  This 
is  a  retrospective  method  of  valuation,  since  it  accumulates  the  claims  which  have 
been  paid  and  accumulates  contributions  which  have  been  made ;  the  difference  between 
the  two  being  the  value  of  the  accumulated  surplus  or  deficiencies.  In  the  case  of 
fraternal  societies  which  have  had  inadequate  rates  of  contribution,  some  of  the  values 
are  negative.  This  will  be  explained  in  more  detail  in  describing  valuations. 

MORTALITY  RATES.  There  is  no  reason  why  the  mortality  rate  in  a 
fraternity  should  be  either  higher  or  lower  than  in  an  "old  line"  company, 
unless  the  one  takes  poorer  risks  than  the  other  does. — Kansas  Workman. 

While  the  above  statement  is  correct  in  intention,  it  is  unfortunately  put.  There 
are  other  reasons,  and  one  or  two  of  them  are  of  considerable  importance. 

In  the  first  place,  there  is  no>  qualification  made  as  to  the  age  distribution  of  the 
members,  and  yet  this  affects,  more  than  any  other  one  circumstance,  perhaps,  the 
death  rate  of  an  insurance  society.  This  age  distribution,  will  not  be  the  same  in  a 
fraternal  order  as  it  is  in  an  "old  line"  company,  even  though  they  have  been  admitting 
members  between  the  same  age  limits,  for  the  same  length  of  time,  because  of  the 
different  kind  of  policies  issued.  The  ordinary  fraternal  order  deals  principally  in 
straight  life  insurance,  and  the  certificates  have  little  or  no  cash  value  at  any  time. 
The  "old  line"  company,  on  the  contrary,  makes  a  much  more  prominent  feature  of 
the  investment  side  of  insurance,  and  its  policies  have  a  constantly  increasing  cash 
value.  The  result  of  this  difference  is  that  the  old  members  remain  in  the  fraternal 
order,  while  a  large  proportion  of  them  withdraw  from  the  "old  line"  company,  so 
that  in  the  course  of  years  the  age  distribution  becomes  very  different  in  the  two, 
and  the  fraternal  order  will  consequently  show  a  much  higher  death  rate  than  the 
"old  line"  company. 

Another  important  fact  in  this  connection  is  that  every  investigation  that  has 
been  made  of  mortality  experience  shows  that  at  similar  ages  the  death  rate  on 
limited  payment  policies,  whether  endowment  or  whole  life,  is  much  lower  than  on 
ordinary  life  policies,  and  that  the  latter  is  lower  than  that  on  term  policies.  The 
fraternal  order  usually  issues  neither  endowment  nor  limited  payment  life  policies, 
and  a  great  many  of  its  usual  certificates  are  really  taken  on  a  temporary  basis. 
It  is  but  natural  in  these  circumstances  that  the  fraternal  order  should  have  a  higher 


252 

death   rate  than  an  "old  line"   company,  even  when  the  age  distribution  in  the  two 
is  the  same. 

There  are  other  minor  reasons  for  difference,  but  the  two  given  are  sufficient 
to  show  that  the  statement  quoted  from  the  Kansas  Workman  is  decidedly  mislead- 
ing if  unqualified.  The  reason  for  offering  this  criticism  is  that  misinformation  on 
this  subject  is  so  widespread  and  so  injurious  on  account  of  the  false  conclusions 
to  which  it  leads  that  no  effort  should  be  spared  to  disseminate  the  truth. 

PENSIONS.  As  a  solution  of  the  problem  of  superannuation  in  the  government 
service  the  United  States  Civil  Service  Commission  has  recommended  the  compulsory 
purchase  of  deferred  annuities,  payable  at  age  70,  or  upon  the  occurrence  of  prior 
disability.  It  is  believed  by  the  Commissioners  that  this  system  will  be  more  equitable 
than  that  of  pensions,  as  the  element  of  "pull"  enters  so  largely  into  the  latter. 

While  this  opinion  of  the  Commissioners  is  probably  correct,  the  question  may 
well  be  asked,  why  should  government  employes  be  pensioned?  They  are  a  peculiarly 
favored  set,  with  short  hours  and  long  vacations,  and  it  is  difficult  to  understand 
why  the  mere  fact  that  they  are  serving  the  government  should  entitle  them  to 
continued  pay  after  they  cease  such  service  unless  the  employes  of  private  cor- 
porations should  be  equally  favored.  A  pension  is  properly  payable  either  for  extra- 
ordinary services  or  for  premature  disability  incurred  in  the  line  of  duty.  Thus  sol- 
diers or  sailors  who  have  been  wounded  or  otherwise  injured  as  a  result  of  the 
hazardous  service  that  they  perform  are  rightly  entitled  to  be  pensioned,  but  a 
service  pension,  even  for  these,  is  wrong  in  principle.  Similar  remarks  apply  to  the 
fire  and  police  force  of  municipalities. 

That  the  employes  of  the  government  ought  to  provide  for  their  old  age  no  one 
will  deny.  The  only  question  is  as  to  whether  or  not  this  provision  should  be  com- 
pulsory. It  seems  to  me  that  in  making  their  recommendation  the  Commissioners 
have  considered  immediate  effects  only,  and  have  overlooked  the  secondary  effects, 
which,  as  has  been  so  well  pointed  out  by  Herbert  Spencer,  are  frequently  of  far 
more  importance.  The  independence  of  character  of  which  we  boast  so  much  in 
this  country  is  undoubtedly  the  product  of  our  free  institutions,  and  any  steps  in  the 
direction  of  paternalism  should  be  taken  with  the  utmost  hesitation,  and  only  after 
their  necessity  has  been  conclusively  demonstrated.  We  all  desire  that  other  people 
should  be  good,  but  most  intelligent  men  have  come  to  the  conclusion  that  they  cannot 
be  made  good  by  law — that  it  must  be  entirely  by  self-development.  Similarly,  the 
advantages  of  thrift  are  abundantly  evident;  but  this  quality  also  must  be  of  indi- 
vidual growth.  It  has  comparatively  little  value  when  forced  by  legislation.  Fur- 
thermore, a  measure  such  as  that  proposed  by  the  Civil  Service  Commissioners  would 
tend  to  retain  government  servants  in  their  positions  in  spite  of  their  lack  of  merit. 

There  are  numerous  minor  objections  that  might  be  raised  to  this  recommenda- 
tion, but  enough  has  been  said  to  show  that  it  should  not  be  endorsed  without  care- 
ful examination  and  consideration  of  all  its  possible  results. 

Some  States  and  many  cities  have  pension  funds,  most  of  them  being  largely 
maintained  and  dominated  by  those  who  expect  to  become  beneficiaries  under  the 
system. 

Railroad  and  other  corporations  subscribe  to  pension  funds  for  employes  and  in 
some  instances  control  the  management  of  the  funds  and  prescribe  the  relief  to  be 
granted. 

There  are  pension  funds  maintained  by  cooperative  associations  of  teachers  and 
policemen  and  firemen,  etc. 


I  have  investigated  many  of  these  funds  and  there  can  be  urged  against  them 
the  objections  to  pensioning  public  servants,  or  they  are  subject  to  the  criticism 
of  contributions  inadequate  for  the  benefits  promised,  even  in  respect  of  the  teachers' 
funds. 

STRENGTH  OF  FRATERNITY.  There  is  an  inherent  strength  in  fraternity  where  there 
exists  real  fraternity.  A  Mason  will  do  much  and  sacrifice  much  for  a  brother  Mason. 
It  is  the  same  with  a  Woodman,  a  Workman,  a  Maccabee,  an  Arcanumite,  a  Forester, 
and  members  of  many  other  real  and  truly  fraternal  orders  which  have  that  bond 
of  brotherly  love  which  really  binds. 

The  fraternity  of  such  societies  is  an  element  of  strength  which  counts  for  dollars, 
and  can  be  relied  upon  with  the  same  degree  of  faith  as  can  the  contract  promises 
to  pay  premiums  by  policy-holders  of  business  life  companies. 

There  is  a  disposition  to  "pooh-pooh"  this  element  of  strength  when  writing  about 
the  millions  of  promised  benefits  assumed  by  the  fraternal  beneficiary  societies. 

There  are  eighty-seven  fraternal  beneficiary  societies  which  can  depend  upon  the 
spirit  of  fraternity  to  materially  aid  them  in  placing  these  organizations  on  a  per- 
manent and  sound  basis.  There  are  others  which  can  depend  upon  the  fraternity  of 
their  associations  to  equal  so  much  money,  but  the  amount  would  be  difficult  to  state 
in  dollars  and  cents.  There  are  some  which  have  given  too  much  attention  to  the 
business  side  and  too  little  to  the  fraternal  side  and  must  place  no  reliance  in  fra- 
ternity to  help  them  out  of  difficulties. 

All  fraternal  orders  which  preach  and  practice  fraternity  have  a  strength  wholly 
unknown  to  business  organizations. 

If  officials  will  only  be  frank  and  candid  and  thoroughly  confidential  and  honest 
with  their  members,  telling  them  plainly  and  truthfully  of  present  or  prospective 
difficulties,  they  can  be  assured  of  support  in  any  practical  remedy  to  overcome  such 
difficulties. 

There  will  be  certain  members,  for  individual  and  personal  reasons,  who  will  make 
a  great  noise,  and  often  make  it  appear  that  the  members  will  turn  out  and  turn 
their  backs  upon  the  honest  officials,  but  no  instance  of  such  a  thing  can  be  recalled. 

Honest  officials  of  the  true  fraternal  orders  can  depend  upon  the  discrimination 
and  justice,  as  well  as  the  strength,  of  real  fraternity. 

Demagogues  and  self-seeking  persons  will  endeavor  to  make  the  members  believe 
that  the  executive  officers  are  doing  a  wrong  thing  in  telling  the  truth  and  in  offering 
a  remedy  for  universally  acknowledged  errors  and  defects. 

These  kind  of  people  always  have  a  big  mouth  and  a  loud  voice,  and  they  have 
been  going  about  making  quite  a  noise,  but  the  members  will  not  be  fooled. 

Fraternity  is  a  thing  to  be  conjured  with,  if  it  be  real.  The  counterfeit  won't  do. 
The  name  "Fraternal"  is  not  sufficient. 

Indeed,  the  greatest  strength  of  fraternity  has  a  breaking  point. 

Nearly  every  one  of  the  eighty-seven,  now  in  mind,  is  placing  a  greater  and 
greater  strain  upon  its  bonds  of  brotherhood,  which  is  something  that  must  stop, 
otherwise  they  must  be  soon  placed  in  the  doubtful  class. 

Don't  strain  and  abuse  fraternity.  Encourage  and  use  it  for  the  betterment  of 
man  and  the  protection  of  women  and  children. 

ADEQUATE  RATES.  Certainly  no  one  will  accuse  the  author  of  this  book  of  oppos- 
ing the  adoption  of  adequate  rates  by  fraternal  orders.  He  has  been  too  urgent  in 
advocacy  of  them  for  his  position  to  be  misunderstood. 

However,  the  mere  adoption  of  a  plan  of  adequate  rates  of  assessment  will  not 
assure  present  or  future  solvency. 


254 

The  proceeds  from  the  assessments  must  be  properly  applied  if  the  rates  of  assess- 
ment are  to  maintain  a  successful  management. 

Rates  may  be  "adequate"  in  so  far  as  computations  are  concerned,  but  if  the  pro- 
ceeds are  dissipated  in  wasteful  operation,  careful  calculation  goes  for  naught. 

The  officials  of  fraternal  orders,  in  some  instances  at  least,  are  following  the  "old 
line"  example  set  for  them  nearly  half  a  century  ago. 

Actuaries  computed  tables  of  "adequate  rates''  for  the  old  line  companies,  and  the 
same  were  adopted  and  put  into  force,  and  the  companies  advertised  the  fact  and 
thereby  gained  the  confidence  of  the  public. 

Straightway,  officials  of  many  of  the  life  companies  diverted  funds  from  the  uses 
intended  by  the  actuaries,  and  it  followed  that  primarily  adequate  premiums  were 
inadequate  to  support  abuse  and  extravagance. 

The   result  was   failure. 

This  result  was  hurried,  in  many  cases,  by  examination  and  valuation. 

The  result  of  diverting  funds  by  fraternal  officials  will  ultimately  be  failure. 

That  result  will  be  no  less  disappointing  and  disastrous  because  of  ignorance  in 
the  uses  of  funds  by  these  fraternal  officials. 

It  will  not  alter  the  situation  even  though  the  funds  arc  used  in  "building  up" 
the  society. 

A  good  plan  and  adequate  rates  will  not  make  a  successful  life  insurance  or- 
ganization. 

Wise  and  economical  management  will  do  more  with  a  poor  plan  and  inadequate 
rates  than  wasteful  and  extravagant  management  will  do  with  a  perfect  plan  and 
adequate  rates. 

Without  regulation,  supervision  and  valuation,  there  is  possible  great  danger  of 
the  public  being  deceived,  and  may  be  defrauded,  by  officials  adopting  "adequate 
rates"  and  securing  endorsement  by  actuaries  of  their  sufficiency,  and  then  destroy- 
ing the  effect  of  such  endorsement  by  improper  management. 

In  calculating  or  certifying  to  adequate  rates,  the  actuary  or  mathematician  must 
always  assume  proper  management,  and  the  use  of  funds  according  to  the  assump- 
tions of  the  computations. 

If  there  is  no  restraint  or  regulation  to  prevent  or  correct  poor  or  improper  man- 
agement the  adequacy  of  rates  and  endorsement  of  an  expert  cannot  keep  the  or- 
ganization from  failure. 

COMPETING  FOR  ADEQUACY.  No  better  evidence  could  be  given  of  the  change  in 
public  sentiment  than  the  pride  with  which  officials  of  fraternal  orders  announce  a 
revision  of  assessment  rates. 

We  predict  that  the  shibboleth  of  "Cheapness,"  which  was  the  dependence  of 
deputies  and  organizers  for  so  many  years,  will  soon  be  relegated  to  the  things  which 
have  been. 

It  is  significant  that  the  more  recently  organized  societies  have  been  most  active 
in  the  effort  to  provide  adequate  rates. 

They  are  wise  in  this,  because  the  longer  the  operation  on  wrong  lines,  the  more 
difficult  it  becomes  to  get  upon  a  sound  basis. 

This  truth  was  recently  strikingly  demonstrated  by  actual  application  of  a  cer- 
tain schedule  of  rates  to  three  different  societies ;  one  of  them  had  just  organized 
and  the  rates  could  be  applied  to  all  of  its  members;  the  second  had  been  operating 
for  twenty  years,  but  85  per  cent  of  its  members  were  within  admission  ages  and 
to  whom  the  rates  could  be  applied;  the  third  had  been  operating  about  twenty 


255 

years,  but  a  very  large  percentage  of  members  was  above  the  admission  ages  and 
the  rates  were  inadequate  for  these  at  their  attained  ages. 

The  schedule  was  an  exceedingly  attractive  one  for  the  new  society. 

For  the  second  society  the  schedule  was  equally  attractive  for  the  members  within 
admission  ages;  but,  when  the  rates  were  advanced  proportionately  to  attained  ages 
of  the  older  members,  they  became  so  exorbitant  as  to  arouse  protest  and  antagonism 
from  these  members.  To  avoid  such  a  condition,  it  was  necessary  to  "load"  a  part 
of  this  burden  upon  the  younger  members,  which  "loading"'  necessarily  increased 
the  rates  at  the  lower  ages  and  made  the  schedule  less  attractive. 

While  the  third  society  did  not  have  members  at  more  advanced  ages,  it  had  a 
larger  proportion  of  its  membership  at  these  ages.  While  the  relief,  per  each  $1,000 
of  protection,  for  the  old  members  was  the  same,  age  for  age,  as  in  the  second  society, 
the  aggregate  amount  "loaded"  onto  the  younger  members  made  much  higher  rates 
at  the  lower  ages  in  the  third  society,  and  hence  rendered  the  schedule  less  attractive 
when  applied  to  that  society. 

In  the  first  society  the  member,  at  say,  20  years  of  age  was  only  required  to  pay 
a  rate  necessary  to  cover  the  cost  of  his  own  protection.  The  same  was  true,  of 
course,  for  all  other  members  at  their  respective  ages. 

In  the  second  society,  the  member  at  age  20  (as  well  as  members  at  other  admis- 
sion ages)  would  be  required  to  pay  a  rate  to  provide  for  his  own  protection,  and, 
in  addition,  an  extra  rate  for  the  purpose  of  assisting  older  members. 

In  the  third  society  a  still  higher  extra  rate  must  be  paid  by  the  younger  for  the 
benefit  of  the  older  members,  because  of  the  large  number  of  the  latter  in  proportion 
to  the  former. 

Represented  by  its  present  value  in  cash,  the  "load"  placed  upon  the  member  at 
age  20,  by  the  second  society,  was  $35  per  $1,000  of  insurance.  This  meant  an  extra 
rate  of  about  60  cents  annually. 

The  present  value  of  the  "load"  laid  upon  the  member  at  age  20,  by  the  third 
society,  was  $53  per  $1,000  of  protection,  which  meant  a  yearly  extra  rate  of  90  cents. 

Suppose  the  annual  rate,  at  age  20,  without  any  "loading"  for  old  members  was, 
say  $9.00,  then  that  would  be  the  rate  for  the  member  of  age  20  in  the  first  society. 
For  a  member  of  the  same  age  in  the  second  society  the  rate  would  be  $9.60,  and  in 
the  third  $9.90. 

The  second  and  third,  as  compared  with  the  first  society,  would  be  at  a  disadvan- 
tage of  60  and  90  cents,  respectively,  because  they  would  only  offer  $1,000  of  pro- 
tection for  $9.60  and  $9.90,  which  could  be  had  on  as  safe  a  plan  in  the  first  society 
for  $9.00. 

The  above  demonstrates  three  things,  namely: 

First,  a  society  should  start  right. 

Second,  if  the  start  is  wrong,  the  society  should  get  right  as  quickly  as  possible. 

Third,  that  rates  which  are  adequate  when  applied  to  one  society  may  be  in- 
adequate when  applied  to  some  other  society. 

ADEQUACY,  PERMANENCY,  ATTRACTIVENESS.  These  are  the  three  requisites  for  a 
practical  and  successful  schedule  of  assessment  rates. 

The  rates  may  be  "Adequate"  for  a  temporary  society,  and  they  may  be  very 
"Attractive"  because  "cheap,"  which  is  always  possible  for  temporary  protection.  But 
such  rates  might  not  assure  "Permanency." 

Rates  may  be  "Adequate"  and  may  be  such  as  to  guarantee  "Permanency,"  and 
yet  may  not  be  "Attractive." 


256 

So,  also,  rates  may  be  "Attractive,"  but  wholly  "Inadequate"  to  provide  for 
promised  benefits  or  to  assure  "Permanency." 

Unless  there  is  obtained  a  combination  of  "Adequacy,"  "Permanency"  and  "At- 
tractiveness," there  can  be  no  successful  business  operation. 

"Adequacy"  of  rates  may  guarantee  "Permanency,"  but  if  not  "Attractive,"  the 
society  adopting  them  will  fail  for  lack  of  public  patronage. 

There  may  be  "Attractiveness,"  but  if  the  rates  are  not  "Adequate"  and  give 
assurance  of  "Permanency,"  then  the  society  adopting  them  will  fail  because  unable 
to  fulfill  its  promises. 

To  successfully  work  the  combination  of  "Adequacy,"  Permanency"  and  "Attract- 
iveness" requires  the  joining  together  of  expert  knowledge  in  the  preparation  of  rates 
and  practical  knowledge  in  applying  them  to  existing  conditions. 

NECESSARY  COMBINATION.  There  is  no  royal  road  to  good  and  successful  man- 
agement of  any  sort  of  a  life  insurance  organization. 

There  are  no  simple  rules  to  be  laid  down  for  attaining  to  a  perfect  system  in 
business  methods. 

In  the  words  of  Josiah  Quincy:  "Neither  a  good  system  nor  good  men  can  be 
sufficient  alone.  They  must  be  combined.  An  ideal  organization  can  be  perverted 
by  bad  men,  and  the  efforts  of  good  men  can  be  rendered  nugatory  by  defective 
systems." 

There  have  been  failures  amongst  "old  line"  companies,  not  because  of  defects 
in  the  system  of  insurance,  but  because  of  mismanagement  by  incompetent  or  dis- 
honest men. 

There  have  been  failures  amongst  fraternal  orders,  not  because  the  officers  and 
managers  were  incompetent  or  dishonest,  but  because  of  a  defective  system. 

For  successful  and  permanent  operation  there  must  be  a  combination  "of  good 
men  and  a  perfect  system. 

Adequate  rates  and  a  scientific  plan  are  of  no  avail  when  the  business  manage- 
ment is  controlled  by  selfish,  designing,  incompetent,  unscrupulous  or  dishonest  men. 

The  fact  of  a  scientific  plan  and  adequate  rates  may  become  a  cloak  to  hide  the 
misdeeds  or  mistakes  of  such  men. 

The  plan  and  the  rates  are  emblazoned  in  shining  letters  to  dazzle  the  eye,  to 
the  end  that  ruinous  management  may  not  be  noticed  until  too  late  for  remedy. 

On  the  other  hand,  the  results  of  adding  new  members;  of  economical  manage- 
ment, of  popular  social  features,  may  so  attract  attention  as  to  cause  members,  and 
even  officials,  to  neglect  to  look  into  the  system  under  which  the  business  is  being 
operated. 

Present  promises  may  be  made  for  the  future  payments  of  millions  and  millions 
in  benefits,  without  any  consideration  whatever  of  the  means  for  the  fulfillment  of 
these  promises. 

Because  thousands  of  persons  can  be  persuaded  to  accept  certificates  as  evidences 
of  the  promises  to  pay  future  benefits,  and  in  consideration  therefor  will  make  monthly 
contributions  of  small  amounts,  these  facts  appear  conclusive  as  to  the  efficiency  of 
management  and  the  prosperity  of  the  society. 

The  relation  between  the  contributions  and  the  promises  are  utterly  ignored. 

In  a  general  way  it  is  realized  that  the  promises  can  only  be  fulfilled  by  having 
contributions  adequate  for  the  payment  of  all  claims  under  these  promises. 

But  how  many  members,  how  many  directors  and  trustees  and  officials  stop  to 
question  and  analyze  and  investigate  the  system  and  plan  of  operation?  How  many 
of  these  can  give  a  plain  and  satisfactory  and  correct  answer  to  the  question : 


257 

"Will  the  promised  contributions  be  adequate  and  sufficient  to  provide  for  the 
promised  benefits?" 

Permanent  life  insurance  organizations  cannot  be  builded  by  good  men  and  good 
managers  alone. 

There  must  be  a  combination  of  good  men  and  good  plans. 

Look  to  it  that  your  society  has  both,  else  ultimate  failure  will  result. 

LEGISLATION.  The  importance  of  thrift,  both  to  the  individual  and  to  the  com- 
munity, has  been  so  often  told  in  song  and  story  that  a  rehearsal  of  the  tale  would 
be  wearisome  and  profitless.  Charity  is  a  beautiful  virtue  when  the  necessity  for  it 
exists,  but  few  intelligent  persons  will  deny  that  alms-houses  and  dispensaries  are 
blots  on  our  fair  landscape,  only  less  hideous  than  jails  and  penitentiaries.  The 
abolition  of  poverty  may  be  an  "irridescent  dream,"  but  surely  the  eye  of  hope  is 
not  forbidden  to  view  a  time  when  every  adult  male  shall  be  able  and  willing  to 
support  himself  and  his  natural  dependants.  Verily,  it  is  a  consummation  devoutly 
to  be  wished,  and  to  the  accomplishment  of  no  better  end  can  we  devote  our  sur- 
plus energies. 

In  this  connection  precept  is  not  lacking.  Advice,  proverbial  and  otherwise,  so 
prominently  adorns  the  pages  of  both  permanent  and  ephemeral  literature  and  is 
thundered  from  so  many  platforms  and  pulpits  that  he  who  would  escape  the  all- 
pervading  admonitions  must  seek  a  rock  in  the  mighty  waste  or  some  "boundless 
contiguity  of  shade,"  "far  from  the  madding  crowd." 

It  is  the  incompetent  that  need  to  learn  the  lesson  of  thrift,  and  it  is  of  the  utmost 
importance  to  society  that  they  should  be  encouraged  therein. 

Unable  properly  to  protect  themselves,  they  should  receive  the  more  consideration 
at  the  hands  of  the  law. 

To  those  that  clear  their  minds  of  cant  and  reason  from  facts  instead  of  formulas, 
the  necessity  of  a  certain  admixture  of  paternalism  with  government  is  apparent. 

Men  -with  the  ability  to  acquire  wealth  may  safely  be  left  to  take  care  of  it  in 
their  own  way. 

Not  so  the  poor,  however.  Their  money  is  hard  earned  and  still  more  hard  saved, 
and  the  loss  of  their  little  surplus  is  not  only  a  misfortune  to  them,  but  indirectly 
to  the  whole  community,  in  that  it  discourages  the  developing  habit  of  providence. 

For  these  reasons,  if  for  no  others,  peculiar  safeguards  should  be  applied  to  the 
business  of  any  financial  institution  that  caters  specially  to  the  poor. 

This  duty  of  the  government  has  been  recognized  in  the  case  of  savings  banks, 
and,  as  a  result,  the  loss  of  deposits  made  therein  is  exceedingly  rare. 

Of  perhaps  equal  importance  with  the  savings  banks  are  the  great  fraternal  bene- 
ficiary associations,  the  so-called  poor  man's  insurance  societies. 

For  some  reason  not  easy  to  understand,  but  probably  owing  to  the  influence  of 
general  apathy,  the  government  has  grossly  neglected  its  duty  toward  these  orders. 

Perhaps  because  of  their  democratic  management  they  have  been  largely  free 
from  restraint. 

In  most  cases  failure  of  the  society  has  caused  little  or  no  financial  loss  to  the 
members  because  collections  were  made  for  the  purpose  of  paying  current  claims 
only,  and  there  was  no  accumulated  fund  belonging  to  the  aggregate  membership. 

The  damage  resulting  from  failures  has  been  largely  indirect,  but  none  the  less  real. 

Many  members,  a'ike  ignorant  of  insurance  principles  and  of  the  modus  operand* 
of  their  own  societies,  supposed  that  they  were  paying  for  whole  life  protection. 

Upon  discovery  of  their  error  they  were  not  unnaturally  disposed  to  blame  every- 
thing else  rather  than  their  own  lack  of  information. 


258 

Embittered  by  disappointment,  they  denounce  the  whole  fraternal  system  as  a 
fraud  and  often  abandon  the  attempt  to  protect  their  families  in  this  way. 

Thus  what  should  be  a  blessing  becomes  a  curse,  in  that  it  discourages  rather  than 
stimulates  the  disposition  toward  thrift. 

Such  an  attitude  on  the  part  of  the  poorer  classes  is  most  unfortunate  and  de- 
mands the  serious  consideration  of  everyone  interested  in  the  welfare  of  humanity. 

If  a  remedy  can  be  found  that  will  restore  and  justify  the  confidence  once  placed 
in  these  societies,  it  cannot  be  applied  too  quickly. 

Within  recent  years  reserve  funds  have  become  increasingly  prominent  in  the 
plans  of  the  various  orders  so  that  failures  will  be  more  disastrous  in  the  future  than 
they  have  been  in  the  past.  To)  prevent  these  failures,  which  are  inevitable  under 
present  loose  methods  of  regulation,  is  one  of  the  most  urgent  duties  of  the  times. 

As  fraternal  beneficiary  associations  are  chartered  by  the  various  States,  and 
thus  receive  official  endorsement  of  their  plans,  the  duty  of  the  State  to  test  such 
plans  before  issuing  the  charters  is  clear. 

This  duty  is  rendered  more  imperative  by  the  fact  that  the  average  citizen  is 
utterly  incapable  of  doing  the  work  himself. 

Life  insurance  contracts  cover  long  periods  and  are  based  on  assumptions  as  to 
mortality  and  interest  that  place  them  beyond  the  comprehension  of  all  who  are  not 
somewhat  instructed  in  the  technicalities  of  the  subject. 

The  average  man  buys  protection  to  his  family  as  he  buys  medical  or  legal  advice, 
largely  on  faith.  He  cannot  test  the  quality  of  his  purchase  except  by  results. 

In  the  latter  two  cases  these  results  are  more  or  less  immediate;  in  the  former 
they  are  remote. 

Yet  the  State  properly  requires  the  aspirant  for  medical  or  legal  practice  to  demon- 
strate his  competency  before  it  allows  him  to  solicit  the  public. 

Still  more  rigid  should  the  requirement  be  in  the  case  of  a  life  insurance  or- 
ganization, which  expects,  on  the  average,  to  receive  money  for  many  years  before 
it  makes  any  direct  return. 

The  plan  of  such  an  institution  needs  to  be  adequate  not  only  for  the  present,  but 
for  a  long  time  to  come. 

By  failing  to  subject  these  plans  to  proper  tests  'before  permitting  their  operation, 
the  State  neglects  one  of  its  most  important  duties. 

It  is  true  that  old  line  companies  are  held  to  a  pretty  strict  accountability  where 
net  reserve  laws  are  in  force ;  but  the  fraternal  order,  which  caters  particularly  to  poor 
men,  to  whom  the  loss  of  their  protection  is  of  the  most  serious  consequence,  in  re- 
spect of  reserves,  is  practica'ly  unrestrained.  The  recently  enacted  valuation  laws 
for  fraternal  societies  is  a  step  in  the  right  direction — and  probably  is  a  sufficiently 
progressive  step  until  1921,  when  their  effect  can  be  determined  and  their  defects  cured. 
INSURANCE  METHODS.  "Principles"  are  often  confused  with  "methods"  in  respect 
of  rates  of  assessment  for  insurance  cost. 

There  is  in  reality  but  one  primary  principle  underlying  the  business  of  life  insurance. 

There  are  many  ways  or  methods  of  applying  that  principle  to  practical  operation. 

One  way,  and  the  first  method  which  was  adopted  in  practice,  is  to  make  a  level 
rate  for  all  contributing  members,  regardless  of  age,  occupation,  health  or  residence, 
and  levy  assessments  according  to  that  rate  to  provide  for  claims  as  they  occur. 

This  method  may  be  modified  by  confining  the  insurance  to  one  class,  as  in  Brook- 
lyn, N.  Y.,  where  there  is  a  society  which  insures  doctors  only. 

Or  the  modification  may  be  in  excluding  certain  hazardous  occupations,  or  persons 
in  bad  physical  condition,  etc. 


259 

Another  method  is  to  grade  the  rates  to  ages  of  entry  and  have  them  remain 
level  thereafter  and  increase  the  number  of  assessments  to  provide  for  increased  cost. 

Again  the  method  may  be  to  grade  to  ages  of  entry  and  have  the  rates  remain 
level  thereafter,  and  provide  for  the  future  increase  in  cost  by  adding  to  the  rates 
an  excess  charge  over  actual  cost  for  a  number  of  years  so  as  to  produce  an  accumu- 
lation to  take  care  of  the  heavier  cost  in  later  years.  This  is  called  the  "Level  Pre- 
mium" method. 

And  then  there  is  a  method  of  grading  rates  to  ages  of  entry  and  have  them  in- 
crease annually  or  periodically  thereafter  to  cover  the  increasing  cost.  This  is  the 
"Natural  Premium"  or  "Term"  method. 

There  are  other  different  methods  of  providing  for  the  payment  of  the  cost  of 
insurance  protection,  and  there  are  many  modifications  and  combinations  of  all  of 
the  methods. 

The  object  of  all  of  them  is  to  pay  claims  under  the  agreements  and  contracts  of 
insurance. 

Some  one  very  pertinently  wants  to  know  why  a  man  should  not  exercise  the 
privilege  of  selecting  either  method  that  suits  his  fancy. 

Why  should  Insurance  Commissioners,  or  legislators,  undertake  to  prevent  so- 
cieties or  associations  from  offering  protection  under  any  one  of  these  methods? 

There  should  be  no  abridgment  of  the  right  of  the  individual  to  select  the  method 
of  payment  most  to  his  liking.  The  very  fact  that  he  elects  to  choose  between 
methods  is  evidence  of  discrimination  and  judgment,  and  every  man  should  be  left 
to  his  own  judgment  in  such  purely  personal  matters. 

It  is  not  so  easy  to  answer  the  question  when  it  relates  to  open  and  unrestricted 
license  to  societies  and  associations. 

If  they  would  tell  the  whole  truth  about  their  methods  and  leave  the  applicant 
to  intelligently  select,  then  unrestrained  operation  would  be  advisable. 

However,  it  is  well  known  that  individuals  are  persuaded  to  take  insurance  pro- 
tection. Very  few  voluntarily  seek  it.  Very  few  use  any  judgment  in  deciding  be- 
tween methods.  Almost  invariably  they  accept  what  they  take  on  faith  and  believe 
what  is  told  them  as  to  plans  and  methods. 

In  such  circumstances,  would  it  not  be  well  to  require  organizations  to  fairly 
represent  what  they  have  to  offer? 

Would  it  no't  be  to  the  advantage  of  those  who  voluntarily  tell  the  whole  truth 
to  have  some  law  to  force  all  to  be  truthful? 

If  one  society  has  the  old  equal  levy  plan,  and  believes  it  good,  why  should  it 
object  to  being  advertised  as  operating  upon  such  a  method?  And  so  with  all  others 
having  different  methods. 

Why  should  not  each  tub  stand  upon  its  own  bottom? 

Why  not  have  each  society  state  its  method  in  plain  terms  and  then  succeed  or 
fail  upon  the  merits  of  it? 

Why  not  have   insurance  principle   the   foundation   stone   for  practical   operation? 

THE  NATURAL  PREMIUM  PLAN.  The  following  exhibit  is  worth  study  from  many 
angles. 


260 

Take  columns  2.  and  3.  Column  2.  shows  the  "natural  premiums,"  the  "annually 
increasing  costs  of  insurance."  Column  3  shows  the  sum  that  an  entrant  at  20  will 
pay  towards  claims  on  account  of  death  amongst  his  associate  insurants,  amounting 
to  $8,009.80  if  he  lives  to  age  98,  and,  under  the  pure  natural  premium  plan,  he  would 
be  assessed  $1,000  to  pay  his  death  claim  should  he  die  at  that  age  as  expected  of  him. 

Then  note  the  last  item  of  column  5,  showing  $7,967.58  as  the  total  of  "mortuary 
increment"  in  comparison  with  $1,242.22  as  the  "interest  increment"  under  the  net 
level  annual  premium  of  $10.34. 

Following  is  an  analysis  and  demonstration  of  the  workings  of  the  two  plans  from 
age  20  to  the  limit  of  the  N.  F.  C.  Table  at  age  99,  under  an  assumption  of  4  per 
cent  interest : 

Column  o  gives  the  number  of  years  from  ages  20  to  98,  inclusive. 

Column  i  gives  the  level  annual  premium  at  age  20  for  insuring  $1,000  in  the 
event  of  death. 

Column  2  gives  the  natural  annual  premiums,  or  yearly  increasing  insurance 
costs  of  $1,000  payable  at  death,  beginning  with  $5.00  at  age  20,  and  increasing 
yearly  to  $1,000  at  age  98,  for  the  seventy-ninth  and  last  year  of  insurance. 

Column  3  gives  the  summation  of  the  natural  premiums  (in  column  2),  and  shows 
the  total  amount  ($9,009.80)  that  would  be  paid  by  a  member  who  entered  at  age 
20  and  survived  to  age  99  (the  limit  of  life  as  assumed  in  the  Mortality  Table). 

Column  4  gives  the  amounts,  with  4  per  cent  interest,  taken  each  year  from  the 
level  premium  and  placed  in  reserve  to  the  end  of  the  twenty-ninth  year.  Beginning 
with  the  thirtieth  year  the  insurance  cost  (see  column  2)  exceeds  the  level  premium 
(.and  interest  thereon)  by  7  cents,  which  latter  amount  is  drawn  from  the  accumu- 
lated reserve  from  the  member's  premiums  (shown  in  column  5).  The  difference 
between  the  cost  and  the  level  premium  in  succeeding  years  is  drawn  from  the 
reserve  accumulated  by  the  member  until  that  fund  is  exhausted  in  the  fifty-fifth 
year.  Beginning  with  the  fifty-fifth  year  the  difference  between  the  yearly  increasing 
costs  and  the  level  premium  is  drawn  from  "Mortuary  Accretions,"  being  the  accumu- 
lated amount  of  reserve  payments  (with  interest)  that  have  been  forfeited  by  those 
who  have  died. 

Column  5  gives  the  summation  of  the  amounts  (with  interest)  which  have  been 
placed  in  the  reserve  from  the  level  premium  payments.  There  are  additions  from 
the  level  premiums  and  interest  for  twenty-nine  years.  The  additions  are  only  from 
interest  after  the  twenty-ninth  year,  since  the  entire  level  premium  is  consumed  for 
insurance  cost  in  succeeding  years.  The  costs  of  insurance  increase  so  rapidly  in 
these  succeeding  years  that  they  also  consume  the  entire  individual  reserve  accumu- 
lation before  the  end  of  the  fifty-fifth  year.  Beginning  with  the  latter  year,  the  mem- 
ber's interest  in  the  accumulation  from  reserve  payments  forfeited  by  those  who  have 
previously  died  is  made  available  to  meet  the  increasing  demands  for  insurance  cost 
(as  given  in  column  2).  The  summation  of  the  amounts  thus  drawn  from  "Mor- 
tuary Accretions,"  shown  in  this  column  (5)  from  the  fifty-fifth  to  the  seventy-ninth 
year,  discloses  the  fact  that  the  member  is  benefited  thereby  to  the  amount  of 
$7,967.58.  It  has  required  all  of  his  payments  with  interest  (under  the  level  pre- 
mium, see  $1,242,22  in  column  6),  and  $7,967.58  forfeited  by  deceased  members,  to 
pay  the  costs  of  his  $1,000  of  protection  during  seventy-nine  years. 

Column  6  gives  the  sum  of  columns  3  and  5,  and  shows  the  total  amounts,  with 
interest,  paid  by  the  member  under  the  level  premium  plan  of  contributing  the 
yearly  and  uniform  amount  of  $10.34.  Beginning  with  the  fifty-fifth  year,  the  sum  of 
columns  3  and  5  is,  in  reality,  a  difference,  because  the  amounts  in  the  latter  column 
are  minus  quantities,  being  derived  from  the  accumulation  of  others  and  not  from 
the  payments  by  the  individual  member.  The.  annual  increase  in  column  6,  after 
the  fifty-fifth  year,  is,  therefore,  only  the  amount  of  the  level  premium  ($10.34) 
with  interest,  or  $10.75. 


261 


(0) 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

1 

10.34 

5.00 

5.00 

5.75 

5.75 

10.75 

2 

10.34 

5.04 

10.04 

5.71 

11.69 

21.73 

3 

10.34 

5.07 

15.11 

5.68 

17.84 

32.95 

4 

10.34 

5.11 

20.22 

5.64 

24.19 

44.41 

5 

10.34 

5.15 

25.37 

5.60 

30.76 

56.13 

6 

10.34 

5.20 

30.57 

5.55 

37.54 

68.11 

7 

10.34 

5.26 

35.83 

5.49 

44.53 

80.36 

8 

10.34 

5.32 

41.15 

5.43 

51.74 

92.89 

9 

10.34 

5.39 

46.54 

5.36 

59.17 

105.71 

10 

10.34 

5.47 

52.01 

5.28 

66.82 

118.83 

11 

10.34 

5.55 

57.56 

5.20 

74.69 

132.25 

12 

10.34 

5.65 

63.21 

5.10 

82.78 

145.99 

13 

10.34 

5.75 

68.96 

5.00 

91.09 

160.05 

14 

10.34 

5.87 

74.83 

4.88 

99.61 

174.44 

15 

10.34 

6.00 

80.83 

4.75 

108.34 

189.17 

16 

10.34 

6.15 

86.98 

4.60 

117.27 

204.25 

17 

10.34 

6.31 

93.29 

4.44 

126.40 

219.69 

18 

10.34 

6.49 

99.78 

4.26 

135.72 

235.50 

19 

10.34 

6.70 

106.48 

4.05 

145.20 

251.68 

20 

10.34 

6.92 

113.40 

3.83 

154.84 

268.24 

21 

10.34 

7.17 

120.57 

3.58 

164.61 

285.18 

22 

10.34 

7.45 

128.02 

3.30 

174.49 

302.51 

23 

10.34 

7.77 

135.79 

2.98 

184.45 

320.24 

24 

10.34 

8.11 

143.90 

2.64 

194.47 

338.37 

25 

10.34 

8.48 

152.38 

2.27 

204.52 

356.90 

26 

10.34 

8.87 

161.25 

1.88 

214.58 

375.83 

27 

10.34 

9.29 

170.54 

1.46 

224.62 

395.16 

28 

10.34 

9.75 

180.29 

1.00 

234.60 

414.89 

29 

10.34 

10.27 

190.56 

.48 

244.46 

435.02 

30 

10.34 

10.82 

201.38 

-.07 

254.17 

455.55 

31 

10.34 

11.44 

212.82 

-.69 

263.65 

476.47 

32 

10.34 

12.15 

224.97 

-1.40 

272.80 

497.77 

33 

10.34 

12.90 

237.87 

-2.15 

281.56 

519.43 

34 

10.34 

13.75 

251.62 

-3.00 

289.82 

541.48 

35 

10.34 

14.68 

266.30 

-3.93 

297.48 

563.78 

36 

10.34 

15.71 

282.01 

-4.96 

304.42 

586.43 

37 

10.34 

16.86 

298.87 

-6.11 

310.49 

609.36 

38 

10.34 

18.12 

316.99 

-7.37 

315.54 

632.53 

39 

10.34 

19.50 

336.49 

-8.75 

319.41 

655.90 

40 

10.34 

21.05 

357.54 

-10.30 

321.89 

679.43 

41 

10.34 

22.75 

380.29 

-12.00 

322.77 

703.06 

42 

10.34 

24.64 

404.93 

-13.89 

321.79 

726.72 

43 

10.34 

26.72 

431.65 

-15.97 

318.69 

750.34 

44 

10.34 

29.03 

460.68 

-18.28 

313.16 

773.84 

45 

10.34 

31.57 

492.25 

-20.82 

304.87 

797.12 

46 

10.34 

34.39 

526.64 

-23.64 

293.42 

820.06 

47 

10.34 

37.52 

564.16 

-26.77 

278.39 

842.55 

48 

10.34 

40.96 

605  .  1  2 

-30.21 

259.32 

864.44 

49 

10.34 

44.77 

649.89 

-34.02 

235.67 

885.56 

50 

10.34 

48.98 

698.87 

-38.23 

206.87 

905.74 

262 


(0) 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

51 

10.34 

53.65 

752.52 

-42.90 

172.24 

924.76 

52 

10.34 

58.81 

811.33 

-48.06 

131.07 

942.40 

53 

10.34 

64.49 

875.82 

-53.74 

82.57 

958.39 

54 

10.34 

70.81 

946.63 

-60.06 

25.81 

972.44 

55 

10.34 

77.78 

1024.41 

-67.03 

-40.19 

984.22 

56 

10.34 

85.48 

1109.89 

-74.73 

-114.92 

994.97 

57 

10.34 

93.99 

1203.88 

-83.24 

-198.16 

1005.72 

58 

10.34 

103.40 

1307.28 

-92.66 

-290.81 

1016.47 

59 

10.34 

113.84 

1421.12 

-103.09 

-393.90 

1027.22 

60 

10.34 

125.35 

1546.47 

-114.60 

-508.50 

1037.97 

61 

10.34 

138.09 

1684.45 

-127.34 

-635.84 

1048.72 

62 

10.34 

152.19 

1836.75 

-141.44 

-777.28 

1059.47 

63 

10.34 

»  167.77 

2004.52 

-157.02 

-934.30 

1070.22 

64 

10.34 

184.96 

2189.48 

-174.21 

-1108.51 

1080.97 

65 

10.34 

204.04 

2393.52 

-193.29 

-1301.80 

1091.72 

66 

10.34 

225.08 

2618.60 

-214.33 

-1516.13 

1102.47 

67 

10.34 

248.35 

2866.95 

-237.60 

-1753.73 

1113.22 

68 

10.34 

274.15 

3141.10 

-263.40 

-2017.13 

1123.97 

69 

10.34 

302.57 

3443.67 

-291.82 

-2308.95 

1134.72 

70 

10.34 

334.18 

3777.85 

-323.43 

-2632.38 

1145.47 

71 

10.34 

368.79 

4146.64 

-358.04 

-2990.42 

1156.22 

72 

10.34 

407.67 

4554.31 

-396.92 

-3387.34 

1166.97 

73 

10.34 

449.75 

5004.06 

-439.00 

-3826.34 

1177.72 

74 

10.34 

498.45 

5502.51 

-487.70 

-4314.04 

1188.47 

75 

10.34 

549.38 

6051.89 

-538.63 

-4852.67 

1199.22 

76 

10.34 

602.74 

6654.63 

-591.99 

-5444.66 

1209.97 

77 

10.34 

655.17 

7309  .  80 

-644.42 

-6089.08 

1220.72 

78 

10.34 

700.00 

8009.80 

-689.25 

-6978.33 

1231.47 

79 

10.34 

1000.00 

9009.80 

-989.25 

-7967.58 

1242.22 

If  the  foregoing  table  is  carefully  studied,  a  clear  understanding  should  be  had 
of  the  difference  between  the  level  and  natural  premiums.  And  there  should  also  be 
a  definite  appreciation  of  the  advantages  of  the  two  plans. 

It  will  be  seen,  from  comparing  columns  3  and  6,  that  the  member  entering  at 
20  does  not  pay  out  a  total  sum  under  the  "Natural  Premium"  equal  to  the  sum 
paid  under  the  "Level  Premium"  until  the  end  of  fifty-four  years,  or  at  age  74.  To 
the  latter  age  the  advantage  is  with  the  "Natural  Premium"  plan. 

If  no  interest  is  accounted  for  on  the  excess  payments  under  the  level  premium 
plan,  and  only, the  actual  payments  of  $10.34  annually  are  considered,  even  then  the 
advantage  is  with  the  "Natural  Premium"  plan  for  forty-three  years,  as  may  be 
seen  by  comparing  columns  i  and  3.  At  the  end  of  forty-three  years  the  total  pay- 
ments under  the  "Level  Premium"  amount  to  $444.62,  and  under  the  "Natural  Pre- 
mium" to  $431.65.  Thus  the  advantage  of  the  latter  is  maintained,  under  the  most 
favorable  comparison,  to  the  advanced  age  of  64,  when,  ordinarily,  there  are  few, 
if  any,  dependants. 

This  advantage  in  the  method  of  paying  costs  by  "Natural  Premiums,"  from  age 
20  to  64,  if  improved  as  any  provident  man  could  and  should  improve  it,  would  be 
represented  by  a  cash  accumulation  of  $318.69  (see  column  5)  at  age  64. 


263 


It  is,  therefore,  clear  that  the  actual  amounts  paid  in  assessments,  without  con- 
sidering interest  on  excesses,  amount  to  a  greater  sum  under  the  Level  than  the 
Natural  Premium  plan  during  forty-three  years.  If  the  difference  in  payments  is 
utilized,  there  could  be  accumualted  $318.69,  as  an  old  age  or  other  benefit. 

If  insurance  protection  is  continued  to  the  advanced  ages,  when  there  are  few 
or  no  dependants  to  protect,  then  the  "Natural  Premium"  plan  is  not  so  attractive. 

It  is  a  plan  that  follows  "Nature"  and  conforms  to  the  ordinary  conditions  in  life, 
and  meets  the  demands  of  common  sense  in  deciding  upon  a  plan  for  the  protection, 
of  dependants  at  a  time  when  they  most  need  protection. 

It  is  not  a  plan  to  provide  for  old  age,  or  to  encourage  speculation  upon  the 
lives  of  old  people  or  to  build  up  estates,  or  to  answer  for  an  investment.  It  is  not 
a  plan  to  be  safely  or  economically  operated  beyond  age  65  or  70  in  its  pure  and 
simple  form.  It  must  be  combined  in  some  way  with  reserve  accumulation  if  pro- 
tection is  to  be  continued  beyond  age  70. 

DEDUCTIONS  FROM  THE  N.  F.  C.  TABLE. 

Column  i  gives  the  number  dying  during  each  year,  assuming  100,000  persons 
living  at  age  20.  Thus,  during  the  first  year,  age  20  to  21,  500  die.  During  the  second 
year,  age  21  to  22,  501  die,  making  the  total  deaths  in  the  two  years  1,001.  At  the 
end  of  the  fiftieth  year,  age  69  to  70,  50,698  of  the  original  100,000  have  died.  Hence, 
half  of  all  the  original  entrants  would  be  dead  between  age  69  and  70,  or  at  the 
end  of  49.7  years,  as  shown  in  column  3  opposite  age  20. 

Column  2  gives  the  years  of  "Life  Expectancy."  The  figures  in  this  column, 
whether  for  the  N.  F.  C.  Table  or  any  other  mortality  experience,  are  almost  uni- 
versally misused  when  endeavoring  to  base  rate  upon  "Life  Expectancy." 

Column  3  gives  the  "Equation  of  Life,"  which  is  the  number  of  years  that  will 
elapse  until  half  of  the  original  entrants  at  any  given  age  have  died.  Thus,  of  1,000 
persons  at  age  20,  500  will  have  died  within  49.7  years.  O'f  1,000,  at  age  25,  one-half 
will  have  died  at  the  end  of  45.2  years.  Of  1,000  at  age  40,  one-half  will  have  died 
at  the  end  of  31.7  years.  And  so  on  for  each  age,  as  shown  in  column  3. 

Column  4  gives  the  number  of  years  that  will  elapse  before  an  entrant  will  con- 
tribute on  the  natural  premium  system  an  amount  equal  to  the  face  of  his  cer- 
tificate. Thus,  a  member  who  enters  at  age  20  and  pays  $5.00  the  first  year  and  $5.04 
the  second  year,  and  so  on,  increasing  each  year  according  to  the  N.  F.  C.  Mortality 
Table,  will  require  54-7  years  to  contribute  $1,000.  Similarly,  a  member  entertaing 
at  age  30  will  require  45-3  years.  The  corresponding  figures  for  other  ages  will  be 
found  in  this  column  opposite  the  respective  ages. 


(0) 

(1) 

(2) 

(3) 

(4) 

20 

500 

45.6 

49.7 

54.7 

21 

1,001 

44.9 

48.8 

53.8 

22 

1,503 

44.1 

47.9 

52.8 

23 

2,006 

43.3 

47.0 

51.9 

24 

2,511 

42.5 

46.1 

50.9 

25 

3,018 

41.8 

45.2 

50.0 

26 

3,528 

41.0 

44.3 

49.1 

27 

4,041 

40.2 

43.4 

48.1 

28 

4,558 

39.4 

42.5 

47.2 

29 

5,080 

38.6 

41.6 

46.3 

30 

5,607 

37.8 

40.7 

45.3 

31 

6,140 

37.0 

39.8 

44.4 

32 

6,680 

36.2 

38.9 

43.5 

33 

7,228 

35.4 

38.0 

42.5 

34 

7,785 

34.6 

37.1 

41.6 

35 

8,352 

33.9 

36.2 

40.7 

36 

8,930 

33.1 

35.3 

39.7 

37 

9,521 

32.3 

34.4 

38.8 

264 


(0) 

(1) 

(2) 

(3) 

(4) 

38 

10,127 

31.5 

33.5 

37.9 

39 

10,749 

30.7 

32.6 

36.9 

40 

11,389 

29.9 

31.7 

36.0 

41 

12,049 

29.1 

30.9 

35.1 

42 

12,732 

28.3 

30.0 

34.2 

43 

13,440 

27.5 

29.1 

33.3 

44 

14,174 

26'.  8 

28.2 

32.4 

45 

14,935 

26.0 

27.4 

31.4 

46 

15,725 

25.2 

26.5 

30.5 

47 

16,547 

24.4 

25.6 

29.6 

48 

17,404 

23.7 

24.8 

28.7 

49 

18,298 

22.9 

23.9 

27.9 

50 

19,233 

22.2 

23.1 

27.0 

51 

20,214 

21.4 

22.2 

26.1 

52 

21,243 

20.7 

21.4 

25.2 

53 

22,326 

19.9 

20.6 

24.3 

54 

23,466 

19.2 

19.8 

23.5 

55 

24,668 

18.5 

19.0 

22.6 

56 

25,938 

17.8 

18.2 

21.8 

57 

27,280 

17.1 

17.4 

20.9 

58 

28,698 

16.4 

16.6 

20.1 

59 

30,199 

15.7 

15.8 

19.3 

60 

31,787 

15.0 

15.1 

18.5 

61 

33,468 

14.4 

14.4 

17.7 

62 

35,246 

13.7 

13.6 

16.9 

63 

37,126 

13.1 

12.9 

16.1 

64 

39,111 

12.4 

12.2 

15.3 

65 

41,205 

11.8 

11.6 

14.6 

66 

43,411 

11.2 

10.9 

13.8 

67 

45,729 

10.7 

10.3 

13.1 

68 

48,159 

10.1 

9.7 

12.4 

69 

50,698 

9.5 

9.1 

11.7 

70 

53,343 

9.0 

8.5 

11.1 

So  much  has  'been  said  about  the  undesirability  and  unattractiveness  of  the 
"Natural  Premium"  or  "Step  Rate"  plan  of  insurance  that  column  4  was  especially 
prepared  to  show  that  it  is  a  paying  proposition  for  a  great  many  years,  even  when 
taken  at  advanced  ages. 

No  one  will  deny  that  the  "Natural  Premium"  plan  is  the  very  cheapest  possible 
in  the  event  of  early  death. 

The  practical  question  for  decision  is  (when  deciding  upon  the  plan  for  paying 
assessments),  how  long  will  I  probably  need  protection  for  dependants,  and  how 
long  will  I  probably  live? 

The  needs  of  protection  for  dependants  is  an  individual  matter  exclusively  and 
must  be  determined  by  each  member  for  himself.  Assistance  in  the  determination 
cannot  be  rendered  by  an  appeal  to  averages.  The  individual  must  know  his  present 
status,  estimate  the  prospects  for  the  future  and  make  his  own  calculations  as  to 
the  time  when  present  and  prospective  dependants  will  relieve  him  from  care  for 
their  support. 

As  to  how  long  he  will  probably  live,  an  approximate  idea  can  be  given  to  him 
by  consulting  column  3.  According  to  observed  experience,  half  of  a  given  number 
of  persons  at  his  age  (say  35)  have  survived  for  36.2  years.  Hence,  it  is  assumed 
that  he  has  an  equal  chance  to  live  for  that  period. 

If  he  were  to  pay  the  increasing  insurance  costs  as  they  accrue  from  year  to 
year,  according  to  the  "Natural  Premiums,"  it  would  require  that  he  should  live  and 
pay  for  40.7  years  'before  he  would  pay  out  $1,000. 


265 

Should  he  only  live  the  average  life  time,  36.2  years,  he  would  pay  out  as  assess- 
ments $671,  which  would  be  $229  less  than  the  sum  insured,  and  hence  the  "Natural 
Premium"  plan  would  yield  a  "profit"  for  more  than  half  of  all  who  entered  at  age  35. 
The  "profit,"  or  "benefit,"  to  the  heirs  of  those  who  died  in  the  first  year  of  insurance, 
and  who  had  paid  one  annual  assessment  of  $6.15,  would  be  $993.85.  To  the  heirs  of 
those  who  died  in  the  thirty-sixth  year  of  insurance  the  "profit"  would  be  $229  over 
all  payments  of  assessments. 

Why  is  it  not  an  attractive  proposition  that  will  yield  to  half  of  all  who  enter 
at  age  35  "profits"  to  heir  ranging  from  $993.85  to  $229? 

Each  member  has  an  equal  chance  with  every  other  member  of  benefitting  his  heirs 
to  a  greater  or  less  extent,  according  to  the  year  of  his  death,  but  which  in  any  event 
will  exceed  by  at  least  thirty-three  and  one-third  per  cent  his  total  outlay,  even 
though  he  survive  to  the  age  of  71. 

If  1,000  members  enter  into  insurance  at  age  40,  half  of  them  will  survive  for 
31.7  years,  while  no  one  of  these  survivors  will  pay,  by  "Natural  Premiums,"  a  total 
sum  equal  to  $1,000  in  less  than  36  years.  It  follows)  that  the  500  who  die  before 
attaining  to  72  years  of  age  will  pay  out  much  less  than  $1,000  in  assessments. 

Entering  at  60,  i't  would  require  18.5  years  for  a  member  to  pay,  by  "Natural 
Premiums,"  the  sum  of  $1,000.  Half  of  a  given  number  at  60  would  die  within  15.1 
years,  and,  therefore,  half  would  pay  out  much  less  than  $1,000  under  the  "Natural 
Premium"  plan,  even  at  that  advanced  age. 

It  is  just  as  well  to  calmly  consider  this  "Step  Rate"  plan  before  condemning  it 
by  mere  inspection  of  the  figures  at  the  very  advanced  ages. 

Insurance  is  for  the  protection  of  dependants,  is  it  not?  How  many  dependants 
will  there  be  at  age  70,  anyway? 

How  much  need  will  there  be  for  it  after  the  age  of  three  score  years  and  ten?. 

Up  to  that  age  you  have  a  good  proposition,  and  you  have  an  equal  chance  with 
your  associates  for  living  to  70,  since  beginning  as  young  as  20  only  a  fraction  more 
than  half  of  all  original  entrants  will  have  died  before  reaching  that  age. 

Under  the  "Natural  Premium"  plan  there  is  no  bother  about  reserve  accumulation 
and  investments  and  interest  earnings.  It  is  a  straight,  simple  insurance  proposition, 
where  you  "pay  as  you  go,"  and  get  exactly  what  you  pay  for. 

If  a  man  believes  that  he  will  be  of  that  number  who  live  beyond  the  average  life 
time,  that  he  will  survive  beyond  the  "Equation  of  Life,"  then  he  may  look  with 
disfavor  upon  the  "Natural  Premium"  plan,  which  levies  large  and  progressively 
increasing  assessments  at  the  very  advanced  ages. 

It  is  strange  that  anyone  should  have  anxiety  about  protection  for  dependants 
beyond  the  age  of  70,  since  so  little  need  exists  for  such  protection,  yet  that  apparent 
anxiety  is  the  basis  for  objection  to  the  "Natural  Premium"  plan. 

If  the  real  purpose  were  exposed  by  close  analysis  of  what  men  really  desire  at 
these  advanced  ages,  it  would  be  discovered  that  they  want  protection  for  them- 
selves in  old  age,  and  they  have  an  idea  that  an  insurance  certificate  on  their  own 
lives  will  serve  their  purpose. 

It  is  a  mistaken  use  of  life  insurance  to  undertake  to  turn  it  to  such  a  purpose, 
and  there  will  result  disappointment  from  such  an  undertaking.  However,  if  the 
effort  is  to  be  made  to  combine  in  one  contract  protection  for  self  in  old  age  as  well 
as  protection  for  dependants  during  the  dependancy  period,  then  the  "Level  Pre- 
mium" plan  is  superior  to  the  "Natural  Premium"  plan,  by  virtue  of  the  accumulation 
to  the  credit  of  the  former  at  advanced  ages. 

THE  LEVEL  PREMIUM  PLAN.  There  are  many  things  to  be  said  in  favor  of  the 
straight  "Level  Premium"  plan,  and  much  more  to  be  said  in  favor  of  the  "Natural 


266 


Premium"  plan,  but  it  is  not  to  be  disputed  that  popular  sentiment  strongly  leans 
towards  the  former.  Much  of  this  sentiment  is  due  to  a  misconception  of  insurance 
methods  and  principles. 

Believing  that  too  much  details  is  impossible  in  this  connection,  I  submit  another 
chart  showing  the  working  of  the  reserve  under  a  level  premium. 

/ooo. 


PRACTICAL  WORKING  OF  THE  RESERVE. 

This  chart  illustrates  the  Level  Premium  at  the  age  of 
35  in  five-year  periods.  The  curved  line  represents  the 
increasing  cost  of  insurance  according  to  the  N.  F.  C. 
Table  of  Mortality,  and  begins  there  at  $6.00  annually  and 
ends  at  $1,000. 

The  horizontal  line  which  represents  the  Level  Premium 
cuts  the  curved  line  at  a  point  corresponding  to  $16.62. 
To  the  left  of  the  point  of  crossing  the  distance  between 
the  curved  and  straight  lines  represents  the  amount  of 
excess  payments  at  any  point.  The  corresponding  dis- 
tance to  the  right  of  the  crossing  represents  deficiency.  It 
is  obvious  at  a  glance  that  the  deficiencies  are  far  greater 
than  the  excesses.  The  balance,  however,  is  maintained 
by  means  of  interest  and  mortuary  accretions  on  the  over 
payments  of  the  early  years.  When  the  age  of  crossing  is 
reached  there  is  on  hand  the  sum  of  $329,  which  reserve  is 
thereafter  drawn  upon  each  year  to  help  out  deficiency 
payments.  Thus,  in  the  25th  year,  the  cost  of  insurance 
is  $23,  and  as  the  payment  is  only  $16,  the  balance  of  $7 
must  be  taken  from  the  reserve.  Exch  succeeding  year  the 
draft  will  be  somewhat  heavier  on  account  of  the  increasing 
cost  of  insurance,  but  as  the  reserve  accretions  increase 
even  more  rapidly,  the  reserve  itself  constantly  grows 
until,  at  the  age  of  99,  it  amounts  to  $1,000,  and  thus  suf- 
fices to  pay  the  entire  claim.  The  inequality  of  the  two 
sections  of  this  chart  illustrates  admirably  the  wonderful 
effects  of  compound  interest  and  mortuary  accretions. 


7 


267 

The  "Natural  Premium,"  or  "Increasing  Cost"  of  Protection  is  greater  than  the 
Level  Premium  after  age  55. 

At  age  60  the  Natural  Premium  is  $22.75 ;  at  65  it  is  $34-39 ;  $53-65  at  70 ;  and  $85.48 
at  75 ;  while  at  80  it  is  $138.09. 

Most  men  are  optimistic  and  they  believe  that  a  long  life  is  allotted  to  them. 
This  feeling  causes  them  to  look  at  the  cost  when  they  are  advanced  -ages  and  when 
comparison  is  made  between  the  Level  and  Uniform  Rate  of  $16.62  and  the  rate  that 
is  $16.86  at  56;  $22.75  at  60;  $53.65  at  70;  and  $138.09  at  80,  they  decide  in  favor  of 
the  Level  Contribution  Rate. 

Their  decision  often  would  be  otherwise  if  they  considered  the  cost  as  set  forth 
in  the  foregoing  analysis. 

Yet,  it  must  be  admitted,  that  men  of  thought  and  experience  and  matured  judgment 
favor  the  Level  Premium. 

The  diagram  illustrates  its  advantages. 

COMPARISON  OF  RESERVES.  As  there  seems  to  be  a  rather  general  impression 
amongst  those  who  have  not  given  special  study  to  insurance  questions  that  reserves 
vary  to  a  considerable  extent,  according  to  the  mortality  table  by  which  they  are 
calculated,  we  have  constructed  a  chart  which  illustrates  in  a  graphic  manner  how 
slight  the  difference  really  is  on  contracts  for  whole-life  insurance. 

The  data  are  for  age  20,  and  terminal  reserves  are  used  so  that  the  increase  as 
representd  by  the  curves  is  from  nothing  to  $1,000.  The  dotted  line  corresponds  to 
the  Actuaries'  Mortality  Table;  the  broken  line  to  the  American  Experience,  and 
the  light  continuous  line  to  the  National  Fraternal  Congress  Table. 

Although  these  three  tables  differ  materially  in  death  rates  at  some  ages,  it  will 
be  observed  that  the  three  lines  are  almost  identical  throughout  their  length. 

The  medium  continuous  line  represents  a  reserve  on  a  contract  providing  for 
natural  premium  payments  to  the  age  of  70,  with  a  slight  reserve  loading  to  keep 
the  payments  level  after  that  age.  Although  the  reserves  under  this  plan,  as  it  will 
be  noticed,  begin  and  end  at  the  same  points  as  those  previously  considered,  yet 
they  are  very  much  lower  at  intermediate  points. 

The  heavy  continuous  line  represents  the  reserves  under  a  temporary  contract 
terminating  at  the  age  of  70.  It  will  be  noticed  that  at  the  start  these  reserves  follow 
much  the  same  course  as  those  under  a  whole-life  contract,  but  they  they  decline 
with  great  rapidity  to  zero  after  reaching  a  maximum.  The  table  accompanying  the 
chart  tells  the  same  story  in  figures. 

It  will  be  noted  that  the  reserves  under  the  National  Fraternal  Congress  Table 
are  greater  than  those  under  the  American  Experience  for  nearly  40  years.  At  the 
end  of  the  fortieth  year  there  is  only  $t.oo  difference  in  favor  of  the  latter,  the 
individual  reserve  being  $455  and  $456  respectively. 

By  combining  the  level  and  natural  premiums  the  reserve  accumulation  is  kept 
at  a  moderate  sum,  being  small  in  the  early  years  of  the  contract  when  there  are 
many  members,  and  large  in  the  later  years  when  the  number  of  members  is  small, 
thus  avoiding  at  any  period  of  the  contract  a  large  aggregate  accumulation. 

On  a  term  contract  ending  at  age  70,  in  the  beginning  the  accumulation  approaches 
in  amount  the  full  reserve  for  a  whole  life  level  rate  certificate,  and  greatly  exceeds 


268 


TERMINAL  RESERVES  4  PER  CENT  FOR 
ENTRY  AGE  20. 


Policy 
Year. 

Actu- 
aries'. 

Ameri- 
ican 
Expe- 

Nation- 
al Fra- 
ternal 
Con- 

Modi- 
fied 
Natu- 
ralPre- 

N.F.C. 

Term 
to  Age 

rience. 

mium 

70. 

gress. 

Plan. 

5 

33 

29 

31 

8 

19 

10 

73 

65 

69 

17 

41 

15 

119 

108 

114 

29 

66 

20 

173 

159 

167 

44 

95 

25 

236 

220 

228 

63 

124 

30 

307 

291 

296 

89 

151 

35 

384 

371 

373 

123 

171 

40 

465 

456 

455 

172 

173 

45 

546 

542 

541 

248 

134 

50 

624 

629 

626 

381 

55 

696 

704 

707 

519 

60 

760 

776 

779 

643 

65 

818 

844 

840 

747 

70 

872 

905 

889 

830 

75 

919 

949 

925 

892 

tf.F.C. 

ACTt/AfHfS 
AMGff.  £jtp. 


ooo. 


QOO 


700 


(ooo 


$00 


[00 


Ooo 


3o    3S 


45 


60 


80 


loo 


269 

that  of  the  whole  life  combined  level  and  niatural  rate.  The  term  reserve  increases 
for  forty  years,  and  then  rapidly  decreases  during  the  last  ten  years,  being  nil  at 
the  end  of  the  fiftieth  year,  at  age  70,  when  the  insurance  period  ends. 

The  most  deceptive  kind  of  a  reserve  is  that  accumulated  under  a  level  premium 
term  certificate,  because  of  the  increasing  accumulation  that  lulls  the  confiding  into 
a  sense  of  security  with  a  sudden  awakening  by  the  rapid  disappearance  of  the 
basis  of  his  hopes. 

THE  LAST  MAN.     Following  is  from  an  insurance  magazine: 

At  frequent  intervals  one  hears  the  statement  that  certain  organizations  can  con- 
tinue and  pay  the  last  man  the  face  of  his  certificate,  regardless  of  growth.  No  in- 
surance organization  has  ever  done  this.  It  is  a  law  of  nature  that  everything  must 
either  progress  or  retrograde.  If  the  latter,  there  comes  a  time  when  normal  condi- 
tions do  not  obtain,  and  then  disaster  follows.  The  properly  balanced  organization 
is  one  which  provides  for  normal  conditions,  which  does  not  rely  unduly  upon  growth 
and  which  does  not  lull  itself  into  a  sense  of  fancied  security  for  the  reason  that  it 
believes  its  plans  are  correct  and,  therefore,  it  will  perpetuate  itself.  There  must 
be  progress  if  successful  results  follow. 

Of  course  an  organization  will  go  out  of  existence  if  new  members  are  not  se- 
cured, because  all  existing  members  must  eventually  die.  But  it  is  surprising  that  a 
well-informed  editor  should  intimate  that  "the  last  man"  could  not  be  paid  if  the 
company  or  society,  which  has  an  adequate  and  scientific  plan,  ceased  writing1  new 
policies  or  certificates. 

The  Pennsylvania  Company  for  Insurance  on  Lives  and  Granting  Annuities  was 
incorporated  and  commenced  business  M'arch  10,  1812.  For  a  number  of  years  the 
company  transacted  a  life  insurance  business,  but  finally  ceased  to  accept  applications, 
but  continued  to  receive  premiums  from  existing  policy-holders  and  to  pay  death 
claims  as  they  occurred. 

At  the  beginning  of  the  year  1901  there  were  just  twenty-four  whole  life  policies 
outstanding,  covering  $91,500  of  insurance.  During  1901  there  were  three  policies 
matured  by  death  for  $8,000,  leaving  on  December  31,  1901,  only  twenty-one  policies 
in  force,  with  $83,500  of  insurance.  During  the  year  1901  the  total  premium  receipts 
were  $1,880.24,  being  $6,119.76  less  than  the  death  claims  paid,  which  deficit  was, 
of  course,  made  good  out  of  the  reserve  fund,  which  latter  amounted  to  $56,975  on 
December  31,  1901. 

Here  we  have  a  life  insurance  business  gradually  decaying,  and  yet  every  claim 
will  be  paid  in  full.  The  reserve  accumulation  of  $56,975  is  67  per  cent  of  the  total 
insurance  in  force — $83,500 — and  it  will  suffice  to  supplement  the  premiums  in  the 
payment  of  the  claim  on  the  "last  man." 

CONCOMITANTS  OF  CHANGE.  The  transition  from  one  system  to  another  is  always 
attended  by  friction. 

An  omelet  cannot  be  made  without  breaking  eggs,  and  you  cannot  right  a  wrong 
without  a  disturbance. 

It  is  as  stated  by  a  coal  miner  when  discussing  the  best  method  of  settling  labor 
troubles :  "In  any  great  change  somebody  is  going  to  get  hurt." 

When  we  become  accustomed  to  certain  conditions,  we  are  tempted  to  endure 
evident  evils  rather  than  submit  to  the  inconvenience  of  a  change. 

These  thoughts  come  from  contemplating  the  situation  of  the  Modern  Woodmen 
of  America. 

For  twelve  months  continuous  agitation  has  disturbed  the  membership  of  that 
great  order. 

Few  of  its  members   deny  the  weakness  of  the  present  plan. 


270 

Those  who  oppose  any  change  base  their  argument  upon  the  present  splendid 
condition  of  the  society,  and  contend  that  the  present  plan  will  suffice  for  ten,  fifteen 
or  possibly  twenty  years  before  the  cost  of  protection  becomes  exorbitant. 

The  laissez  faire  argument  is  the  only  one  presented  in  favor  of  continuing  the 
present  plan.  "Do  not  interfere  with  existing  conditions,  and  let  the  future  take 
care  of  itself,"  is  the  sentiment  of  a  very  large  number  of  the  members. 

But  those  who  take  this  position  do  not  deny  that  a  change  from  the  present  plan 
must  be  made  within  a  few  years. 

There  is  another  large  class  who  favor  a  change  but  want  a  very  little  change. 
They  oppose  anything  which  would  be  "radical."  They  favor  some  makeshift  "or 
expedient,  which  usu'ally  takes  such  form  as  to  permit  them  to  virtually  remain  as 
now,  and  to  throw  the  burden  of  increase  upon  future  members,  whom  they  suppose 
will  be  ignorant  enough  to  join  them,  and  then  become  burden-bearers  for  them. 
This  course  has  been  taken  so  many  times  by  other  societies  that  this  class  of  persons 
believe  that  they  can  successfully  follow  it,  and  that  American  workingmen  will  con- 
tinue to  voluntarily  make  of  themselves  hewers  of  wood  and  drawers  of  water  be- 
cause invited  to  do  so  under  the  guise  of  fraternity.  We  place  a  higher  standard 
upon  American  intelligence  than  to  believe  that  they  can  be  hoodwinked  in  any 
such  fashion. 

There  are  a  great  host  of  thinking,  conscientious  members  who  realize  the  serious- 
ness of  the  situation,  and  who  desire  an  adequate  and  scientific  and  safe  plan,  but 
who  are  divided  as  to  the  kind  of  a  plan  which  should  be  adopted.  The  majority 
of  them  have  a  more  definite  and  a  clearer  conception  of  their  objections  to  the 
several  plans  than  they  have  of  the  particular  plan  they  would  favor. 

It  is  so  easy  to  make  objections;  so  difficult  to  mark  out  a  satisfactory  line  of  action. 

It  is  impossible  to  anticipate  the  action  of  the  next  Head  Camp. 

Political  trading  for  personal  advantage  will  possibly  determine  the  action  on 
readjustment. 

Were  politics  eliminated  from  consideration,  and  were  there  no  office-seekers  to 
influence  results,  it  might  be  predicted  that  a  change  to  an  adequate  plan  would  be 
made.  Some  of  the  head  officers  believe  that  such  will  be  the  result  in  spite  of  the 
handicap  of  self-seeking  politicians. 

MISLEADING  STATEMENTS.     A  society  paper  contains  the  following: 

The  legal  reserve  theory  is  false  because  it  assumes  that  every  policy  issued  will 
become  a  claim.  This  is  borne,  out  by  the  fact,  as  shown  by  experience,  that  the 
actual  amount  needed  to  meet  each  one  million  of  insurance  written  has  only  been 
$473,000;  lapses  relieved  the  companies  of  the  balance.  Therefore,  if  the  estimates 
of  reserve  necessary  to  "pay  the  last  man"  is  reduced  to  one-half  the  present  re- 
quired so-called  legal  reserve  it  would  appear  that  the  resources  will  be  sufficient 
for  every  probable  contingency.  Fraternals  anticipate  making  good  any  deficiency 
in  reserve  from  greater  lapsing,  flexible  rates  and  assessments. 

The  "legal  reserve  theory"  assumes  no  such  thing  as  stated. 

The  "legal  reserve"  is  the  fund  required  by  statute,  and  has  no  reference  what- 
ever to  the  fact  of  assuming  or  not  assuming  that  "every  policy  issued  will  become 
a  claim." 

The  legal  reserve  laws  take  no  cognizance  of  the  method  of  calculating  premium 
rates.  The  only  requirement  is  that  a  fund  must  be  on  hand  which  will  equal  the 
difference  between  the  present  value  of  the  future  premiums  and  the  present  value 
of  the  outstanding  insurance  obligations. 

If  the  premium  rates  are  low,  the  reserve  accumulation  must  be  correspondingly 
large,  because  the  present  value  of  low  rates  is  smaller  than  the  present  value  of 


271 

high  rates,  and  hence  it  requires  a  larger  fund  to  make  good  the  difference  between 
such  smaller  value  and  the  value  of  the  obligations — the  insurance  liabilities  are  not 
affected  by  low  or  high  rates — every  obligation  of  $1,000  must  be  paid,  if  the  or- 
ganization remain  solvent,  and  it  cannot  reduce  that  obligation  by  reducing  rates 
nor  increase  it  by  increasing  rates. 

The  legal  reserve  law  confines  its  operation  to  knowing  whether  or  not  the  fund 
makes  a  balance  between  the  two  values  of  premiums  and  insurance  promises. 

The  law  cares  nothing  about  the  source  from  which  the  necessary  accumulation 
is  obtained,  it  only  has  to  do  with  being  satisfied  that  the  ''legal  reserve"  is  in  pos- 
session of  the  company  in  cash  or  in  good  and  acceptable  securities. 

Misleading  statements  are  detrimental  to  the  general  interests  of  fraternal  orders, 
and  those  who  know  better,  or  ought  to  know  better,  should  not  indulge  them  be- 
cause they  happen  to  pander  to  a  present  prejudice. 

CRITICISM.  To  freely  and  frankly  and  fairly  discuss  the  questions  now  before 
the  fraternal  world  is  to  be  more  or  less  critical  in  all  that  is  written  concerning  the 
present  methods,  especially  in  reference  to  present  rates  of  assessment  of  most  of 
the  fraternal  orders. 

Criticism  is  never  pleasant,  and  consequently  it  is  natural  that  the  officials  of 
some  orders  should  feel  inclined  to  resent  gratuitous  comments  which  more  or  less 
reflect  upon  the  conduct  of  their  societies. 

If  the  criticisms  are  true,  it  is  not  well  for  any  official  to  feel  resentment,  though 
he  may  be  temporarily  hurt. 

The  truth  must  prevail,  and  the  sooner  it  is  recognized  the  better  for  those  who 
are  not  in  line  with  it. 

No  one  likes  to  be  told  of  his  errors,  especially  when  the  telling  of  them  is  in  a 
public  way,  and  yet  the  correction  of  many  mistakes  is  only  possible  by  having  them 
publicly  pointed  out. 

The  animus  of  the  criticism  should  determine  whether  it  is  resented  or  accepted 
in  good  spirit. 

We  should  always  profit  by  criticism.  At  the  same  time  it  is  impossible  for  any- 
one to  feel  other  than  resentful  when  the  critic  is  an  enemy  to  the  cause,  or  to  the 
organization  which  is  criticised. 

When  it  is  known  that  the  criticism  is  from  a  friendly  source  and  the  purpose 
is  to  serve  the  best  interests  of  those  who  are  criticised,  it  can,  and  should,  be  ac- 
cepted in  a  friendly  and  appreciative  way. 

However,  a  critic  is  never  popular,  and  he  is  usually  tolerated  as  a  necessary  evil. 

A  few  persons  have  been  heard  to  deplore  this  spirit  of  criticism,  and  this  dis- 
position to  point  out  defects,  and  this  undertaking  to  present  correct  principles  as 
applicable  'for  successful  operation. 

Some  persons  construe  such  a  spirit,  and  such  a  disposition,  and  such  an  under- 
taking as  evidence  of  a  belief  that  the  fraternal  orders  are  in  a  very  bad  way,  and  are 
going  rapidly  down  hill  to  the  demnition  bow-bows. 

That  is  a  narrow  and  superficial  view. 

The  fraternal  orders  are  becoming  stronger  under  criticism,  because  they  are 
profiting  by  it.  They  are  becoming  more  firmly  fixed  as  life  insurance  organizations, 
because  they  are  setting  about  to  remedy  defects  in  their  plans. 

Criticism  never  hurts  when  the  criticised  person  or  organization  at  once  sets 
about  removing  the  causes  of  criticism. 

Criticism  strengthens  when  those  who  are  criticised  profit  by  it. 


272 

Criticism  insures  success  when  those  who  criticise  are  earnest  advocates  of  the 
subject  of  criticism. 

A  friend's  criticism  is  a  power  for  good,  and  in  no  other  way  is  it  possible  to 
make  so  great  improvement  as  when  there  is  a  mutual  and  earnest  and  honest  in- 
vestigation of  defects  within  the  circle  of  friendship. 

It  is  folly  to  talk  of  the  failure  of  the  grand  cooperative  effort  which  has  builded 
up  the  great  provident  institution  known  as  the  Fraternal  Beneficiary  Societies  of 
America. 

It  is  because  they  are  so  great,  and  because  of  the  glorious  future  that  awaits 
them,  that  it  is  necessary  to  be  sure  that  they  are  operated  upon  right  lines,  and 
that  any  defects  in  plan  should  be  cured  while  they  are  in  the  heyday  of  their 
prosperity. 

For  fifteen  or  twenty  years  prior  to  1895  the  critics  of  fraternal  orders  were  al- 
together found  amongst  the  officers  and  representatives  of  "old  line"  companies.  The 
criticism  indulged  by  them  was  unfriendly,  was  unfavorable,  was  unfair  and  was  unjust. 

The  fraternal  orders  grew  and  prospered,  but  they  did  not  concede  the  truth  of 
such  criticisms,  and,  therefore,  made  no  effort  to  profit  by  them.  The  criticism  did 
not  hurt  the  fraternal  orders,  neither  did  it  benefit  them.  The  officials  of  the  societies 
resented  it,  and  because  of  its  unfriendliness  and  unfairness  they  took  no  heed,  even 
when  there  was  truth  in  it. 

Since  1895,  when  the  first  criticisms  were  indulged  by  members  of  the  National 
Fraternal  Congress,  how  different  has  been  the  situation. 

The  friends  of  fraternal  societies  have  been  investigating  their  conditions,  have 
been  studying  their  positions,  and  have  been  undertaking  to  discover  what  was  neces- 
sary to  be  done  to  make  them  permanent  and  stable  insurance  institutions. 

The  criticisms  which  have  come  from  the  officers  of  these  fraternal  orders,  and 
from  the  editors  of  the  official  organs,  and  from  the  writers  in  the  independent  jour- 
nals have  been  no  less  searching,  and,  indeed,  scorching,  than  the  criticisms  of  old 
line  agents  and  representatives. 

But  there  has  been  a  wonderful  difference  in  the  effect  of  these  criticisms,  be- 
cause they  have  been  made  by  friends,  with  friendly  intent,  and  with  friendly  regard 
for  the  future  of  these  great  institutions. 

The  societies  have  continued  to  grow  and  prosper  under  the  criticisms  of  these 
friends — and  they  have  done  more  than  that,  their  plans  have  been  improved,  and 
steps  are  being  taken  to  place  them  upon  a  firm  and  sound  basis  so  that  they  will 
endure  for  all  time. 

Criticism  properly  made  and  properly  received  is  the  very  basis  of  all  progress 
and  the  foundation  for  all  success. 

The  strength  of  fraternal  insurance  is  shown  by  its  resistance  of  unfriendly  criti- 
cism, and  by  its  acceptance  of  the  criticism  which  is  intended  for  its  improvement. 

Nothing  can  stop  or  prevent  the  progress  of  cooperation  amongst  the  people, 
because  the  people  are  all-powerful. 

Capital  and  combination  may  throw  obstacles  in  the  way,  but  ultimate  success  is 
a  certainty  for  the  majority  of  the  provident  institutions  which  are  now  making  it 
possible  to  protect  the  home  by  mutual  cooperation. 

THE  HOME  OF  BROTHERHOOD.  At  the  dedication  of  the  Carnegie  library  in  Wash- 
ington, D.  C.,  the  donor  said :  "Free  libraries  maintained  by  the  people  are  cradles 
of  democracy,  and  their  spread  can  never  fail  to  extend  and  strengthen  the  demo- 
cratic idea— equality  of  the  citizen,  the  royalty  of  man.  They  are  emphatically  fruits 
of  the  true  American  ideal." 


273 

A    beautiful    truth,    beautifully  clothed! 

If  there  is  any  other  institution  than  the  church  that  is  better  for  a  town,  or  a 
village,  or  a  community,  than  a  public  library,  it  is  the  lodge  room  of  the  fraternal 
beneficiary  society. 

The  lodge  is  the  home  of  brotherhood. 

Around  its  altars  gather  men  who  solemnly  obligate  themselves  to  protect  the 
loved  ones  of  home  from  the  cold  embrace  of  misery,  want  and  despair. 

About  the  fireside  and  within  the  family  circle  there  can  be  found  no  more  faith- 
ful compliance  of  pledges  to  brotherly  consideration  than  in  the  lodge  room  of  the 
true  fraternal  society. 

HEALTH  AND  ACCIDENT  INSURANCE.  The  principal  benefit  granted  by  the  British 
Friendly  Societies  was  that  of  sickness  insurance.  For  a  level  and  uniform  weekly 
contribution  there  was  promised  and  paid  a  weekly  benefit  of  a  small  amount  ranging 
from  five  shillings  to  ten  shillings  a  week.  After  an  illness  had  continued  for  six 
months  the  weekly  benefit  was  reduced,  if  originally  at  ten  shillings,  to  half  the  amount, 
or  five  shillings.  If  the  illness  or  disability  continued  beyond  two  years  the  weekly 
benefit  was  further  reduced  to  one-quarter  pay,  or  in  the  case  of  ten  shillings  originally 
it  was  reduced  to  two  and  one-half  shillings  per  week.  This  last  benefit  was  continued 
indefinitely  during  the  disability  of  the  member,  even  though  the  disease  became 
chronic.  The  liability  for  sick  pay  increased  with  the  advance  in  age  and  the  friendly 
societies  found  themselves  in  an  insolvent  position  because  of  the  large  amount  of 
claims  presented  at  the  advanced  ages.  The  cost  of  sickness  insurance  increases 
with  the  increase  in  age  in  the  same  manner  that  the  cost  of  life  insurance  increases 
with  the  advance  in  age.  The  equal  and  uniform  contribution  rates  for  sickness 
benefits  failed  in  their  adequacy  just  as  equal  and  uniform  contribution  rates  failed 
in  adequacy  for  payment  of  death  claims,  due,  as  stated,  to  the  fact  that  the  liability 
for  either  sickness  or  death  insurance  has  an  increasing  cost  with  the  increasing  age 
of  the  membership. 

Very  recently  there  has  been  great  activity  amongst  what  are  called  health  and 
accident  and  casualty  companies  in  promoting  the  business  of  sickness  and  accident 
insurance.  Almost  without  exception  these  companies  charge  an  equal  and  uniform 
rate,  but  they  save  themselves  somewhat  by  reserving  the  right  to  cancel  the  insurance 
upon  notice.  Under  such  a  contract,  when  the  cost  of  the  protection  granted  becomes 
excessive  or  exceeds  the  contribution  rates  of  course  they  can  relieve  themselves 
of  the  insurance  liability  by  cancelling  the  insurance  contract. 

For  many  years  sickness  benefits  have  been  granted  by  fraternal  societies,  but 
these  have  been  incidental  rather  than  the  main  business  of  the  organization.  Nearly 
every  one  of  the  secret  fraternal  orders  grant  some  form  of  sickness  relief  or  benefit. 
It  has  not  been  in  the  way  of  a  business,  but  rather  as  a  relief  to  those  in  need  and 
only  the  members  who  feel  themselves  in  need  of  the  relief  apply  for  it. 

There  have  been  no  requirements  for  valuations  either  from  the  health  and  acci- 
dent companies  or  from  the  fraternal  societies  which  have  granted  sickness  and 
accident  benefits.  However,  under  the  provisions  of  the  Mobile  Bill  and  the  later 
New  York  Conference  Bill  and  under  the  laws  of  the  States  where  these  bills  have 
been  enacted,  the  requirement  has  been  made  for  the  valuation  of  disability  benefits. 
Whether  or  not  the  Commissioners  will  rule  that  this  includes  the  sick  and  accident 
benefits  is  not  yet  determined.  Certainly  the  provision  requires  a  valuation  of  total 
permanent  disability  benefits  and  there  is  reason  for  the  requirement  of  a  valuation 
of  the  sickness  benefit  where  the  contract  covers  the  whole  period  of  life  or  a  term 
of  years,  since  the  liability  increases  with  age.  In  Great  Britain  the  friendly  so- 


274 

cieties,  or  at  least  the  registered  friendly  societies,  must  make  a  valuation  of  their 
sickness  benefits  every  five  years.  In  principle  the  valuation  of  sickness  benefit  is 
the  same  as  the  valuation  for  death  benefit. 

PERMANENT  TOTAL  DISABILITY.  Insurance  against  permanent  total  disability  is 
included  in  the  insurance  for  disability  on  account  of  diseases  or  accident,  as  granted 
by  the  friendly  societies,  and  as  granted  by  the  fraternal  beneficiary  societies  in 
America  for  many  years  under  the  express  provision  for  total  and  permanent  dis- 
ability. In  1902  I  completed  the  first  investigation  of  permanent  total  disability  ex- 
perience for  the  Knights  of  the  Maccabees  of  the  World,  and  in  1909  I  supplemented 
the  experience  of  that  society  with  its  experience  from  1902  to  1909  and  that  for  the 
Knights  of  the  M'odern  Maccabees  and  of  the  Royal  League  and  of  the  Ladies  of  the 
Modern  Maccabees  and  the  Ladies  of  the  Maccabees  of  the  World.  The  data  ob- 
tained by  me  from  the  experiences  of  these  societies  has  been  employed  in  the  con- 
struction of  several  tables  which  provide  for  the  computation  of  contribution  rates 
for  combined  death  and  disability  benefits. 

Many  fraternal  societies  grant  total  permanent  disability  benefits,  and  ordinarily 
these  are  payable  in  ten  equal  annual  instalments,  sometimes  in  twenty  semi-annual 
instalments  and  sometimes  in  one  payment  on  proof  of  disability.  Some  societies 
require  a  proof  of  disability  and  then  a  probation  period  of  six  months,  when  a 
second  proof  must  be  made  and,  if  satisfactory,  the  first  instalment  of  the  disability 
benefit  is  paid.  After  this  some  societies  continue  to  pay  the  instalments  without  fur- 
ther proof.  In  other  cases  the  society  requires  proof  each  six  months  or  each  year 
as  the  disability  instalment  is  due  and  payable.  Some  societies  promise  to  pay  the 
certificates  by  instalments  at  age  70,  provided  the  member  is  disabled  by  age  or  other- 
wise. Other  societies  assume  total  permanent  disability  at  70  and  promise  to  pay 
the  face  of  the  certificate  by  instahiients  on  attaining  that  age. 

Within  the  last  three  or  four  years  the  life  insurance  companies  have  taken  up 
this  form  of  insurance,  first  in  the  way  of  promising  to  relieve  the  policy-holder  of 
further  premium  payments  in  the  event  of  perm-anent  total  disability,  if  prior  to 
age  60.  That  feature  is  now  contained  in  the  policy  contracts  of  most  every  insur- 
ance company.  Many  of  them  have  gone  further  and  promise  to  pay  the  face  of  the 
policy  in  twenty  annual  instalments  in  the  event  of  total  permanent  disability  pro- 
vided it  occur  prior  to  age  60,  w'hile  others  do  not  limit  the  age,  and  others  pay 
the  benefit  if  the  disability  occur  prior  to  age  70.  Where  the  premium  payments 
are  discontinued  in  the  event  of  total  permanent  disability  sometimes  an  extra  pre- 
mium is  charged,  sometimes  it  is  not.  I  believe  the  Travelers  Insurance  Company 
was  the  first  to  discontinue  the  premiums  in  the  event  of  total  permanent  disability 
and  made  no  extra  charge  for  this  benefit.  Complaint  was  made  of  this  practice  by 
the  Ohio  Insurance  Department  and  after  that  a  nominal  extra  premium  was  charged 
by  the  Travelers.  Many  of  the  companies,  however,  make  no  charge  for  the  dis- 
continuance of  premium  payments  in  the  event  of  permanent  total  disability.  Other 
companies  have  a  graded  extra  premium  rate  according  to  the  age  of  the  insurant. 
Almost  all  the  companies,  as  stated,  limit  the  liability  for  total  permanent  disability 
benefits  or  for  the  discontinuance  of  premium  payments  in  the  event  of  permanent 
total  disability  to  the  occurrence  of  the  event  prior  to  age  60.  Almost  all  of  the 
fraternal  societies  which  promise  a  permanent  total  disability  benefit  also  promise 
the  face  of  the  certificate  by  instalments  at  age  70,  and  hence  this  provision  virtually 
limits  the  occurrence  of  permanent  total  disability  prior  to  age  70. 

READJUSTMENTS.  It  is  well  that  we  learn  from  experience,  and  an  experience 
covering  almost  any  phase  of  insurance  can  be  found  in  England.  Some  of  our 


275 

societies  have  placed  new  members  on  adequate  rates  into  classes  separate  from  the 
old  members  on  inadequate  rates;  other  societies  contemplate  such  a  course, 
and  under  the  valuation  sections  of  the  laws  in  States  which  have  enacted  the  Mobile 
Bill  or  the  New  York  Conference  Bill  there  is  a  provisional  requirement  that  such 
separation  be  made.  Writing  of  a  similar  provision  in  the  rules  of  the  Manchester 
Unity,  Mr.  Watson,  the  actuary,  says: 

It  is  provided  by  General  Rule  82  that  in  cases  wherein  lodges  reduce  benefits 
or  increase  contributions  (or  both)  under  the  instructions  of  the  Board  of  Directors 
the  members  admitted  after  the  date  of  valuation  or  (in  certain  cases)  within  the 
five  years  previous  to  such  date  shall  receive  the  full  benefits  corresponding  with 
their  contributions ;  and  such  members  are  to  form  a  new  and  distinct  section  in 
respect  of  which  separate  accounts  are  to  be  kept. 

The  meritorious  purpose  of  this  provision  is  to  safeguard  the  interests  of  new 
members  by  preventing  the  absorption  of  the  funds  arising  out  of  their  contributions 
by  the  claims  of  the  older  members  in  cases  wherein  the  latter  have  failed  to  accumu- 
late adequate  reserves  against  their  own  liabilities.  In  connection  with  the  Eighth 
Valuation  we  were  instructed  to  value  the  sections  separately  in  all  cases  in  which 
the  funds  of  lodges  were  divided,  and  this  instruction  has  brought  the  system  under 
our  special  notice.  The  result  has  been  to  show  to  us  that  the  system -is,  practically, 
of  somewhat  limited  value,  notwithstanding  the  admirable  principle  which  it  expresses. 
The  first  effect  of  a  reduction  of  benefits  or  increase  of  contributions  is  almost  in- 
variably loss  of  credit,  and  though  thl's  may  be  of  temporary  duration  only,  its  re- 
flection is  at  once  seen  in  the  falling  off  of  admissions.  Every  new  section  opened  in 
such  circumstances  is  numerically  weak,  often  extremely  so,  and  for  a  lengthy  period 
there  is  little  scope  for  the  operation  of  average  results  in  sickness  and  mortality 
experiences.  The  advantage  of  mutual  assurance  between  the  new  and  old  members 
being  entirely  lost,  the  young  members,  thrown  on  the  risk  of  sickness  and  death  as 
a  class  apart,  are  frequently  in  worse  cases  than  they  would  have  been  had  their 
contributions  been  paid  into  the  common  fund  even  with  the  liability  for  an  existing 
deficiency  hanging  over  it.  It  is  obvious  that  unless  there  is  a  strong  probability  that 
a  steady  influx  of  members  will  be  maintained  the  "new  members'  section"  must  be 
subject  to  the  risk  of  serious  fluctuations — and  that  neither  the  accretion  of  a  surplus 
nor  the  growth  of  a  deficiency  in  such  a  section  can  be  regarded  as  establishing  any- 
thing with  regard  to  the  adequacy  of  the  contributions  of  the  members  comprised  in  it. 

Whilst  it  is  of  the  first  importance  that  the  interests  of  young  members  should 
be  protected,  we  are  impelled  to  the  belief,  on  review  of  all  the  facts,  that  the 
system  of  separate  sections  does  not  substantially  achieve  this  purpose;  as  a  general 
plan,  and  excepting  special  cases,  it  appears  to  us  to  be  the  better  course,  whilst  in- 
sisting always  that  financial  changes  shall  be  confined  to  the  members  who  are  re- 
sponsible for  the  existence  of  the  deficiency,  to  retain  the  lodge  as  the  unit  of  the 
assurance  organization,  summarily  closing  those  few  branches  which  from  incurable 
unsoundness  are  as  little  likely  to  obtain  new  members  as  they  would  be  unable  to 
properly  safeguard  their  interests. 

The  concluding  suggestion  in  regard  to  the  retention  of  the  lodge  as  a  unit  is 
applicable  to  the  whole  society  under  the  American  system  of  a  centralized  govern- 
ment, and  I  have  adopted  a  similar  course  in  advising  societies  which  have  fixed  a 
scale  of  adequate  rates  for  new  members  while  leaving  the  old  on  inadequate  rates. 
My  advice  has  been  to  keep  separate  only  the  accumulation  required  to  maintain 
level  and  uniform  the  rates  for  the  new  members  and  to  treat  as  one  fund  the  con- 
tributions for  current  mortality,  and  to  permit  all  savings  and  gains  to  remain  in 
this  fund  for  the  advantage  of  the  general  membership  regardless  of  the  source  of 
the  surplus.  This  course  has  been  advised  because  it  is  right  in  view  of  the  fact 
that  the  new  class  must  be  instituted  from  the  expense  contributions  of  existing 
members.  Where  this  relation  of  mutual  cooperation  and  unity  is  retained,  the  work 
of  securing  new  members  can  proceed  as  when  the  latter  were  obtained  prior  to 
the  adoption  of  an  adequate  rate  scale,  and  the  existing  members  are  assured  of  all 
advantages  from  "new  blood"  and  from  gains  and  savings  incident  to  the  intro- 
duction of  new  lives. 


276 

VALUATION  STATISTICS. 

Different  methods  have  been  adopted  for  keeping  records  for  statistical  purposes, 
each  of  which  has  some  special  advantage.  The  suggestions  hereafter  made  should  be 
considered  in  connection  with  existing  methods  and  adapted  to  the  practice  of  the 
office  to  produce  as  little  disturbance  as  possible  for  the  required  results. 

One  thing  I  would  especially  impress :  Compile  your  statistics  so  that  duplication 
of  work  will  not  be  necessary  in  obtaining  data  for  the  annual  report  and  the  valua- 
tion. The  usual  method  of  arranging  statistics  for  the  annual  report  to  Insurance 
Departments  will  not  supply  the  required  data  in  proper  form  for  a  valuation.  But 
the  statistics  can  be  prepared  to  serve  both  purposes  and  s-ave  double  labor. 

Every  office  should  be  equipped  with  statistical  cards.  The  installation  of  the 
card  system  is  neither  so  laborious  nor  expensive  as  commonly  supposed,  if  the  work 
is  properly  directed.  Many  offices  now  have  statistical  (as  well  as  record)  cards. 
Many  have  not.  The  suggestions  and  sample  sheets  answer  for  either  situation. 

There  are  three  methods  of  valuation  allowed  to  Fraternal  Beneficiary  Societies 
under  Statutory  enactment.  In  the  "New  York  Conference  Bill"  they  are  designated, 
"Net,"  "Tabular,"  and  "Accumulation"  methods  of  valuation.  One  form  of  statis- 
tics is  suitable  for  either  method,  namely :  A  sheet  giving  the  amounts  of  protection 
by  ages  and  years  of  entry  and  form  of  certificate.  The  best  arrangement  for  this 
sheet  is  the  following: 

Form  of  Certificate.  Amount  of  Protection. 

Entry  — Years  of  Entry — 

Ages.  1913.  1912.  1911.  1910.  etc. 

18    1000  looo  1000  1000  etc. 

19    looo  looo  looo  1000  etc. 

20    1000  1000  1000  looo  etc. 

21    looo  looo  looo  1000  etc. 

etc etc.  etc.  etc.  etc.  etc. 

There  must  be  a  separate  sheet  for  each  form  of  certificate.  That  is,  one  for  the 
Whole  Life,  one  for  the  Term,  one  for  the  Death  and  Old  Age,  or  other  form  of 
benefit.  The  valuation  factors  are  different  for  the  Ordinary  Whole  Life  from  those 
for  the  Term  to  Age  60,  or  for  the  Death  and  Old  Age.  With  many  different  forms 
the  work  of  .preparing  statistics  is  considerable,  unless  there  are  statistical  cards 
properly  arranged,  when  the  labor  is  reduced  to  the  minimum. 

Opposite. the  ages  of  entry  in  the  columns  for  the  years  of  entry  are  given  the 
amounts  of  protection  outstanding  as  of  December  31  for  the  year  of  valuation. 

If  the  "Net"  method  of  valuation  is  employed,  the  amounts  of  protection  are 
multiplied  by  the  proper  mid-year  reserve  values.  The  total  of  the  products  will 
give  the  required  "net  reserve"  accumulation. 

If  the  "Tabular"  method  is  used,  the  amounts  of  protection  are  multiplied  by 
the  rates  of  contribution  and  the  products  entered  upon  a  sheet  of  the  form  .above 
indicated  and  then  summed  upward  diagonally  from  left  to  right  to  obtain  the  con- 
tributions by  attained  ages  and  then  are  multiplied  by  modified  annuities  to  obtain 
the  "present  value  of  future  contributions."  The  amounts  of  protection  then  .are 
summed  diagonally  upward  from  left  to  right  to  obtain  the  protection  at 
attained  ages  and  the  amounts  are  multiplied  by  modified  single  premiums  to  obtain 
the  "present  value  of  the  promised  benefits."  The  difference  between  the  present 
values  of  benefits  and  contributions  represents  the  required  accumulation  to  be  in 
possession  of  the  Society  to  make  it  technically  solvent. 

NOTE. — "Tabular"  is  hardly  description  of  a  valuation  of  "promised  benefits"  and  "Future  Net  Con- 
tributions," but  is  quoted  from  another  in  the  absence  of  a  better  term. 


277 

For  whole  life  contracts,  life  annuities  must  be  used;  and  for  term  contracts  (for 
a  designated  period  or  to  a  given  age),  temporary  annuities  must  be  employed  to 
obtain  the  present  value  of  future  contributions.  The  annuities  must  be  modified  to 
obtain  "mid-year"  values. 


Similar  single  premiums  must  be  empoyed  and  modified. 


WJien  monthly  contribution  rates  are  to  be  valued  the  annuities  must  be  on  the 
monthly  basis. 

If  the  "Accumulation"  method  is  adopted,  then  the  amounts  of  protection  are 
multiplied  by  the  proper  accumulation  factors  to  secure  the  required  "credits"  for 
those  members  entitled  to  them.  These  "credits"  correspond  to  the  "net  reserve" 
obtained  by  the  "Net"  valuation  method.  In  fact,  the  "Accumulation"  method  pro- 
duces "net  reserves,"  and  these  will  be  identical  with  the  "net  reserves"  secured  under 
the  "Net"  valuation  method  when  the  contribution  rates  are  deduced  from  the  mor- 
tality table  used  in  the  valuation,  assuming  the  same  rate  of  interest.  The  accumula- 
tion factors  are  obtained  by  employing  the  u  and  k,  or  u  .and  c  columns  in  the 
identical  manner  of  computing  reserve  values  per  $1,000,  assuming  the  same  rates 
of  mortality  and  interest.  Or,  preferably  by  employing  the  accumulation  factors 
nUx  and  nKx. 

It  is  a  simple  sheet  of  statistics  that  is  required  for  the  valuation  of  certificates 
with  level  rates  of  contribution  graded  to  ages  of  entry. 

It  is  not  a  simple  matter  to  those  first  undertaking  the  work  to1  extract  the  re- 
quired data  from  the  records. 

It  is  not  easy  to  write  down  a  plain  statement  of  the  best  method  of  accom- 
plishing the  task  where  statistical  cards  are  not  properly  kept,  or  not  kept  at  all. 

In  the  absence  of  cards  there  is  always  a  membership  register.  The  first  sugges- 
tion will  be  in  reference  to  the  transfer  of  the  data  from  the  register  to  the  sheet. 

In  this  connection  it  is  well  to  caution  against  the  use  of  statistics  carried  for- 
ward from  year  to  year  by  additions  and  deductions.  The  numerous  changes  incident 
to  transfers  from  one  lodge  to  another,  and  due  to  lapses,  reinstatements,  deaths  and 
new  entrants,  make  an  accurate  accounting  very  difficult.  An  accurate  record  is  not 
impossible,  but  it  is  assured  only  by  everlasting  diligence  and  intelligent  checking. 
Where  there  is  such  accounting  the  statistician  will  know  how  to  secure  the  valuation 
data  without  suggestion. 

For  transferring  the  data  from  the  membership  register  the  following  form  is 
recommended  : 

Begin  with  the  first  page  of  the  register  for  members  in  good  standing  December 
31  st,  and  make  a  tally  mark  opposite  the  year  of  entry  on  the  line  for  the  certificate 
amount  and  in  the  column  for  the  year  of  entry.  Make  a  tally  for  the  next  member 
in  good  standing,  and  continue  to  the  completion  of  the  list.  With  the  form  properly 
ruled,  two  clerks  can  make  the  tallies  for  several  thousand  in  a  day  of  eight  hours. 
Large  sheets  ruled  for  five  squares  to  the  inch  (or  to  suit  your  case)  can  be  pur- 
chased at  almost  any  book  store.  Where  there  -are  a  number  of  certificate  amounts 
it  will  require  several  sheets,  but  with  proper  arrangement  and  table  space  they  can 
be  manipulated  without  much  trouble. 

If  there  are  record  cards  instead  of  a  register,  the  same  process  will  be  pursued 
by  beginning  with  the  first  card  in  the  drawer  and  tallying  successively  as  stated. 

For  example,  suppose  the  first  name  (on  register  or  card)  is  of  a  member  who 
entered  at  age  18,  carried  a  certificate  of  $500,  and  joined  in  1913.  The  call  would 


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be  "18,"  "500,"  "1913."  The  operator  would  follow  the  call  and  be  ready  to  make 
the  tally  in  the  right  space  on  the  call  of  "1913."  If  the  entry  age  were  45  (or  one 
to  be  entered  on  a  second  or  third  or  fourth  sheet)  the  operator  soon  would  be 
able  to  locate  it  without  delay.  The  sample  form  shows  tallies  as  in  practice  actually 
made. 

When  the  sheets  are  completed,  the  tally  marks  are  counted  and  the  number 
entered  in  the  space  (preferably  in  red  ink)  for  the  certificate  amount.  In  the  sample 
form,  for  age  of  entry  18,  and  for  the  several  certificate  amounts  and  the  year  of  entry 
1913,  there  are  18  of  the  $500  certificates,  42  for  $1,000,  n  for  $1,500,  and  6  for 
$2,000,  and  a  subtotal  of  77  certificates  and  $79,500  of  protection.  In  the  same  space 
enter  the  amounts  of  protection  (equal  to  the  number  multiplied  by  certificate  amount). 
By  adding  together  the  numbers  of  certificates  for  each  age  of  entry  and  multiplying 
the  total  by  the  certificates  amount  the  product  should  equal  the  sum  of  amounts 
for  each  age  of  entry,  which  is  a  check  of  the  accuracy  of  the  detailed  multiplica- 
tions. This  gives  the  total  number  of  certificates  and  amount  of  protection  for  each 
age  of  entry,  and  is  important  information.  The  sums  of  the  subtotals  in  the  columns 
for  years  of  entry  give  the  total  number  of  certificates  and  amount  of  protection  by 
years  of  entry — also  important  information.  The  grand  totals  for  entry  ages  should 
be  the  same  as  the  grand  totals  for  years  of  entry,  and  is  the  final  check  of  the 
completed  sheet.  These  grand  totals  should  give  the  total  number  of  certificates 
and  amount  of  protection  taken  directly  irom  the  register  or  record  cards.  The 
names  on  the  register,  or  the  cards,  could  be  counted  to  verify  the  total  number 
of  certificates  shown  on  the  sheets.  Or  the  comparison  could  be  made  with  the 
returns  from  the  clerks  of  local  lodges.  The  application  of  some  effective  check 
upon  the  work  should  not  be  neglected. 

If  the  office  has  statistical  cards,  they  should  be  filed  by:  i,  ages  of  entry;  2,  years 
of  entry;  3,  certificate  forms;  4,  certificate  amounts.  To  obtain  the  data  for  the 
valuation  sheet  it  is  only  necessary  to  count  the  cards  for  the  certificate  amounts 
and  enter  the  number  opposite  the  age  of  entry,  on  the  line  of  the  amount  (one  line 
only  for  each  certificate  amount)  and  in  the  column  for  the  year  of  entry.  For 
example:  18  for  $500;  42  for  $1,000;  n  for  $1,500,  and  6  for  $2,000.  The  transcribing 
can  be  done  rapidly  from  statistical  cards,  and  the  checking  is  facilitated  by  the 
count  of  the  total  cards  for  each  age  of  entry  and  all  of  the  years  of  entry  for  that  age. 

The  subtotals  of  numbers  of  certificates  and  amounts  of  protection  should  be 
transferred  to  two  sheets  for  the  advantage  of  compact  form,  as  below. 

NUMBER  OF  CERTIFICATES. 

Entry  — Years  of  Entry — 

Ages.  1913.  1912.  1911.  1910.  1909.    1908.      Totals. 

18 77  7i  68  67  56        46  385 

19 85  87  80  72  48        66  438 

20 65  92  81  80  66        58 

21 54  61  73  65  54        64 

22 72  55  60  59  57        67 


442 
37i 
370 


Entry 
Ages. 

18.... 

19.... 

20. 

21 

22.  . 


AMOUNTS   OF   PROTECTION. 

— Years  of  Entry — 

1913.    1912.    1911.    1910.    1909.  1908. 

$79,500   $76,000   $74,000   $70,500   $57,000  $46,000 

92,500   94,5oo   86,500   76,000   50,500  68,000 

88,000   81,000   91,000   85,000   55,ooo  71,000 

79,000   66,000   72,000   74,000   48,000  57,000 

69,000   72,000   61,000   65,000   64,000  44,000 


Totals. 

$403,000 
468,000 
471,000 
396,000 
375,ooo 


280 

These  sheets  (with  a  carbon)  can  be  made  in  a  few  minutes  on  an  adding  ma- 
chine with  eighteen -inch  carriage,  and  have  the  advantage  of  totals  for  checking. 

The  sheet  giving  the  number  of  certificates  is  of  no  use  to  the  valuer.  The  sheets 
giving  the  amounts  of  protection  by  ages  and  years  of  entry  is  the  one  required 
by  him. 

Both  sheets  can  be  used  by  the  office  in  preparing  schedule  VI  of  the  annual 
report  for  Insurance  Departments. 

The  number  of  members  (or  the  number  of  certificates,  which  will  answer  the 
purpose  of  the  report)  at  attained  ages  is  obtained  by  diagonal  upward  summation 
of  the  numbers  in  the  first  sheet,  assuming  the  entry  age  in  the  current  years  as  the 
attained  age  December  31  of  that  year.  (In  fact,  on  the  average,  the  members  are 
one-half  year  older  on  December  31  of  the  calendar  year,  and  this  fact  is  taken  into 
consideration  in  making  a  valuation  or  in  a  mortality  investigation.) 

Thus:  There  would  be  77  members  (certificates)  at  attained  age  18.  At  attained 
age  19  there  would  be  the  85  entrants  at  age  19  in  1913  and  71  entrants  at  age  18 
in  1912,  making  156  as  the  number  at  attained  age  19.  Similarly  for  attained  age 
20  we  have  the  sum  of  the  65  entrants  at  age  20  in  1913,  and  87  entrants  at  19  in 
1912,  and  68  entrants  at  18  in  1911,  making  220  as  the  number  at  attained  age  20. 
For  attained  age  21  the  summation  would  be  54-|-92-|-So-f  67  equal  293.  For  age  22 
the  summation  would  be  72-}-6i-f  81+72+56  equal  343.  The  same  process  is  continued 
for  other  ages.  The  work  is  facilitated  by  diagonal  ruling  of  the  sheets. 

The  .amounts  of  protection  at  attained  ages  are  obtained  by  the!  identical  pro- 
cess explained  for  members. 

The  above  procedure  gives  the  number  of  certificates  and  amounts  of  protection 
by  attained  ages  for  each  form  of  certificate.  The  same  for  the  different  forms 
(if  there  is  more  than  one  .form)  of  certificates  must  be  combined  into  one  column 
for  members  and  one  for  protection  as  the  exhibit  for  schedule  VI. 

The  totals  of  members  and  amounts  thus  obtained  for  attained  ages  should 
correspond  with  the  grand  totals  by  ages  and  years  of  entry. 

Schedule  VI  also  calls  for  "the  Mortuary  Assessments  received  during  the  year." 
This  has  been  construed  to  mean  the  total  amount  of  the  contributions  less  the  ex- 
pense deductions.  This  is  obtained  by  getting  the  net  monthly  contributions  for 
each  form  of  certificate  (gross  rates  less  expense  deductions)  and  using  these  as 
multipliers  for  the  protection  at  ages  and  years  of  entry.  Thus :  If  the  Whole 
Life  Net  Rate  per  $1,000  at  age  18  is  68  cents,  and  assuming  that  the  sample  sheet 
shows  the  protection1  for  the  Whole  Life  form,  68  would  be  multiplied  by  79.5,  76, 
74,  70.5,  57,  and  46,  and  the  products  entered  on  a  sheet  for  contributions  by  ages 
and  years  of  entry,  thus: 

AMOUNT  OF  ONE  ASSESSMENT. 

Entry  — Years  of  Entry — 

Ages.  1913.        1912.        1911.        1910.        1909.        1908.       Totals. 

18 54.06        51.68        50.32        47.94        38.76        31.28        274.04 

etc etc.  etc.  etc.  etc.  etc.  etc.  etc. 

The  total  of  $274.04  will  be  given  if  a  cross  tabulating  adding  machine  is  used, 
and  its  correctness  is  checked  by  the  product  of  the  total  protection  by  the  contribu- 
tion rate  per  $1,000.00,  or  403X68  equal  274.04. 

The  amounts  of  protection  for  other  ages  and  years  of  entry  are  multiplied  by 
the  corresponding  net  rate  for  the  respective  ages  of  entry  .and  the  products  entered 
as  for  age  18. 


281 

When  the  sheet  has  been  completed  a  diagonal  summation  from  left  to  right  will 
give  the  amount  of  one  assessment  at  attained  ages,  which,  multiplied  by  12,  gives 
the  amount  of  12  assessments  on  the  protection  in  force  December  31.  Similar  sheets 
must  be  made  for  each  form  of  certificate  and  all  combined  for  the  total  contributions. 

The  amounts  thus  finally  obtained  must  be  modified  to  secure  a  total  corresponding 
with  the  actual  cash  received  from  the  net  contributions  during  the  year.  This  modi- 
fication is  made  by  dividing  the  total,  as  above  obtained,  into  the  actual  total  receipts, 
and  use  the  quotient  as  a  multiplier  for  the  amounts  at  each  attained  age,  which  are 
obtained  from  the  diagonal  summation. 

If  there  is  a  considerable  difference  between  the  cash  receipts  from  net  con- 
tributions and  the  total  of  12  .assessments  obtained  from  the  combined  sheets,  some 
error  has  probably  been  made  and  should  be  found. 

Obviously  12  assessments  would  not  be  received  on  the  certificates  written  in 
the  current  year  (1913  in  the  example),  because  >the  members  are  admitted  in  every 
month  of  the  year.  The  average  number  of  assessments  received  from  the  1913  en- 
trants would  not  exceed  6  .and  might  be  5.  The  foregoing  method,  therefore,  would 
overstate  the  contributions  received  in  the  current  year,  but  this  excess,  ordinarily, 
is  offset  by  the  amounts  received  from  members  who  lapse  and  die  during  the  year, 
which  receipts  are  not  shown  in  this  exhibit.  Under  normal  conditions  the  method 
given  will  approximate  the  actual  facts.  As  stated,  if  the  difference  between  the 
actual  receipts  .and  the  estimated  under  this  process  is  very  large,  then  it  may  be 
necessary  to  take  the  average  number  of  assessments  received  in  the  current  year, 
and  also  find  approximately  the  receipts  in  the  year  from  those  who  paid  one  or 
more  assessments  before,  death  or  lapse,  in  order  to  furnish  a  satisfactory  column 
for  schedule  VI  of  the  annual  report.  This  seldom  occurs. 

Many  valuations  were  made  in  1913  for  Fraternal  Beneficiary  Societies  and  dif- 
ferent methods  were  adopted  to  obtain  the  valuation  data.  The  statistician  of  one 
society  adopted  the  following  form : 


etc. 
etc. 
etc. 
etc. 
etc. 


NUMBER   OF  MEMBERS. 

Years  of 
Entry. 

IQOQ 

—  Attained  Ages  — 
18.             19.            20.            21. 
10 

IQIO.  . 

...              28             39 

IQTT 

99              134              171 

IQI2.  . 

03               167               l68              IQ3 

Totals 93  266  330  413 


In  this  form  the  ages  arc  at  the  top  instead  of  at  the  side  of  the  sheet,  and  the 
footings  of  columns  give  the  total  number  at  attained  ages.  The  number  :at  ages  of 
entry  would  be  obtained  by  diagonal  summation  from  left  to  right.  The  above  shows 
the  combined  form  for  members.  To  obtain  the  same  for  protection,  first  it  would 
be  necessary  to  get  the  details  for  certificate  amounts. 

Another  form  is  to  have  the  ages  at  the  side  and  the  years  at  the  top  of  sheet, 
but  to  begin  with  the  first  year  of  operation  for  the  first  column  at  left,  and  the 
current  year  for  the  last  column  to  the  right.  In  such  form  the  diagonal  summation 
must  be  upward  from  right  to  left  to  obtain  attained  ages.  The  work  under  this 
method  is  awkward  to  most  operators. 

The  means  to  the  end  are  immaterial  so  far  as  results  are  concerned.  However, 
they  should  be  chosen  to  suit  office  conditions,  and  the  foregoing  details  are  given 
in  the  way  of  suggestions  for  the  accomplishment  of  results. 


282 

When  the  data  are  in  proper  form  the  cost  of  valuation  should  be  much  reduced. 
Indeed,  the  secretaries  should  agree  upon  a  uniform  blank  for  reporting  statistics, 
and  should  secure  a  scale  of  fees  from  valuers  on  the  ordinary  forms  of  certificates. 

As  the  situation  now  is,  the  actuary  has  great  difficulty  in  making  an  advance 
estimate  of  his  charge  for  valuation.  In  the  first  place,  it  may  be  necessary  to  com- 
pute special  valuation  factors.  In  the  second  place,  he  may  have  to  rearrange  or 
combine  the  data  before  they  can  be  utilized — and  very  often  must  have  errors  cor- 
rected which  have  been  committed  through  lack  of  proper  checking. 

In  passing,  it  may  be  remarked  that  the  first  valuation  under  Section  23b  of  the 
New  York  Conference  Bill  will  always  involve  more  work  and  a  larger  charge  than 
subsequent  valuations.  This  is  also  true  of  valuations  under  Section  23  and  233 
where  valuation  factors  must  be  computed  for  special  forms  of  certificates.  These 
factors  serve  for  subsequent  valuations. 

If  the  "Tabular"  method  of  valuation  is  adopted,  the  society  could  reduce  the  fee 
for  valuation  by  making  the  multiplications  of  the  net  contribution  rates  by  the 
amounts  of  protection  for  ages  and  years  of  entry.  Or  the  office  could  save  the  time 
and  labor  of  this  work  by  having  the  results  furnished  by  the  valuer — it  being  re- 
membered, as  hereinbefore  shown,  that  these  data  can  be  used  not  only  for  the 
valuation,  but  also  in  the  preparation  of  schedule  VI  of  the  annual  report. 

At  the  next  meeting  of  the  National  Fraternal  Congress  of  America  the  secre- 
taries' section  could  spend  some  time  profitably  in  consideration  of  these  matters. 

The  forms  suggested  for  the  compilation  of  the  number  of  members  (or  certi- 
ficates) in  good  standing  and  the  amount  of  protection  in  force  as  of  December  31, 
are  suitable  for  the  compilation  of  statistics  to  show  the  number  of  deaths  and  lapses 
during  the  current  year  by  ages  and  years  of  entry  and  by  attained  ages.  If  these 
statistics  are  prepared,  then  a  close  estimate  can  be  made  of  the  amount  contributed 
during  the  year  by  those  who  have  lapsed  and  died  by  assuming  an  average  of  six 
assessments  for  entrants  in  all  years  excepting  the  current  year,  and  for  that  year 
assuming  three  or  four  assessments,  according  to  whether  or  not  the  first  assessment 
is  paid  at  date  of  entry,  or  at  the  end  of  the  month,  or  in  the  month  after  admission. 

In  cases  where  the  amount  of  the  certificate  is  scaled  for  a  number  of  years,  or 
where  the  protection  increases  from  first  year  of  entry  during  Life  Expectancy, 
or  at  age  70,  or  until  a  designated  amount  is  paid  in  assessments,  the  statistics  are 
compiled  as  of  the  face  of  the  certificate  in  the  manner  described.  The  valuer  will 
make  modifications  by  proper  deductions  for  actual  insurance  in  force  at  date  of 
valuation. 

Societies  having  natural  premium  rates  (contributions  increasing  annually)  can 
secure  amount  of  contributions  by  multiplying  the  protection  at  attained  ages  by 
twelve  times  the  rates  of  contribution  for  respective  attained  ages  and  deducting  for 
the  current  year  as  indicated  for  the  average  number  of  assessments  collected  in 
that  year. 

The  management  should  be  informed  each  year  concerning  the  Mortality  ex- 
perience of  the  Society.  There  is  very  little  extra  work  involved  over  that  of  mak- 
ing a  valuation,  for  the  valuer  to  report  upon  the  mortality  experience.  The  addi- 
tional data  are  the  amounts  of  claims  by  attained  ages.  These  can  be  obtained  by 
compiling  the  statistics  for  certificate  amounts  at  ages  and  years  of  entry  on  the 
claim$  incurred  during  the  year  and  then  summing  diagonally  for  attained  ages,  as 
explained  for  amounts  of  protection  in  force.  In  order  to  closely  approximate  the 
amounts  of  protection  exposed  to  risk  during  the  year  there  should  be  given  the 
protection  at  attained  ages  on  the  previous  December  31,  that  the  mean  of  the  pro- 
tection at  the  beginning  and  end  of  the  current  year  could  be  ascertained,  which 


283 


added  to  the  claims  incurred  at  attained  ages,  will  give  the  protection  exposed  at 
attained  ages  during  the  year.  From  .these  data  the  loss  rates  per  $1,000  are  obtained. 
If  death  rates  pen  1,000  are  desired,  then  the  number  of  members  (or  certificates) 
should  be  treated  instead  of  amounts  of  protection. 

If  it  were  concluded  (and  it  is  desirable)  to  investigate  the  past  mortality  ex- 
perience for  comparison  with  the  current  year,  it  would  suffice  (for  approximate  and 
practical  results)  to  furnish  the  amounts  of  protection  and  the  amounts  of  claims 
incurred,  as  reported  in  schedule  VI,  for  as  many  years  as  the  report  had  been  made. 

I  will  make  some  examples  of  valuation  by  use  of  the  foregoing  sample  exhibit 
of  protection  by  ages  and  years  of  entry. 

The  first  illustrates  the  net  reserve  valuation.  I  have  taken  the  "terminal"  instead 
of  the  "mid-year"  valaes  for  the  reason  that  they  are  found  in  the  Appendix  to  this 
book  for  ordinary  whole  life  protection,  which  is  assumed  in  this  case.  For  ages  18, 
19  and  20  I  have  used  the  reserve  values  for  age  20.  Assuming  that  the  insurance 
was  written  and  in  force  January  ist  of  each  year,  at  the  end  of  1913  there  should 
be,  and  there  is  supposed  to  be,  the  terminal  reserve  at  the  end  of  one  year  for  1913 
issues;  at  the  end  of  three  years  for  the  1912  issues;  at  the  end  of  four  years  for  1911 
issues;  ...  at  the  end  of  six  years  for  the  1908  issues.  Therefore,  we  would 
multiply  the  protection  issued  in  1913  by  the  terminal  reserves  at  the  end  of  one 
year  for  ages  20,  21  and  22,  being  (see  Table  of  Reserves)  $.00578,  $.00604,  $.00632 
(or  $5.78,  $6.04  and  $6.32  per  $1,000  protection).  The  protection  issued  in  1912  would 
be  multiplied  by  the  reserve  values  at  the  end  of  the  second  year;  and  similarly  for 
other  years  of  issue. 

The  following  table  exhibits  the  protection  and  net  reserve  values.  The  total 
protection  of  $2,113,000  requires  $43,566.56  in  reserve  accumulation  as  supplemental 
to  the  present  value  of  future  contributions  to  make  it  equal  to  the  present  value  of 
promised  benefits. 

PROTECTION  BY  AGES  AND  YEARS  OF  ENTRY. 


Years  of  Entry. 

Entry 

Ages. 

1913. 

1912. 

1911. 

1910. 

1909. 

1098. 

Totals. 

18 

79,500 

76,000 

74,000 

70,500 

57,000 

46,000 

403,000 

19 

92,500 

94,500 

86,500 

76,000 

50,500 

68,000 

468,000 

20 

88,000 

81,000 

91,000 

85,000 

55,000 

71,000 

471,000 

21 

79,000 

66,000 

72,000 

74,000 

48,000 

57,000 

396,000 

22 

69,000 

72,000 

61,000 

65,000 

64,000 

44,000 

375,000 

Totals  .  . 

408,000 

389,500 

384,500 

370,500 

274,500 

286,000 

2,113,000 

TERMINAL  RESERVE  VALUES. 


Entry 

Ages. 

1913. 

1912. 

1911. 

1910. 

1909. 

1908. 

Totals. 

18 
19 
20 
21 
22 

Totals  .  . 

459.51 
534.65 
508.64 
477.16 
436.08 

896.04 
1114.16 
954.99 
813.12 
928.08 

1334.22 
1559.60 
1640.73 
1357.20 
1202.31 

1729.37 

1S64.28 
2085.05 
1896.62 
1742.00 

1782.39 
1579.14 
1719.85 
1568.64 
2185.60 

1760.42 
2602.36 
2717.17 
2278.86 
1838.32 

7961.95 
9254.19 
9626.43 
8391.60 
8332.39 

2416.04 

4706.39 

7094.06 

9317.32 

8835.62 

11197.13 

43566.56 

284 


In  the  ordinary  valuation  of  certificates  issued  throughout  the  year,  one-half  a 
year  duration  is  assumed,  and  "mid-year"  reserve  values  must  be  employed.  I  have 
fully  explained  the  method  of  obtaining  "mid-year,"  or  "mean"  reserve  values.  (See 
"Definitions.") 

The  tabular  reserve  values  assume  a  net  contribution  rate  deduced  from  the  Mor- 
tality Table  from  which  the  Reserve  Values  are  derived. 

The  foregoing  is  designated  a  "net  reserve  valuation,"  and  the  total  of  $43,566.56 
would  be  reported  as  the  net  reserve  liability.  For  technical  solvency  the  society 
or  company  should  have  net  assets  not  less  than  the  reserve  liability. 

Under  the  "legal  reserve,"  or  net  valuation  laws  for  life  companies,  the  writing 
of  new  business  would  be  suspended  should  the  net  available  assets  be  shown  on 
valuation  to  be  less  than  the  reserve  value  of  the  outstanding  policies.  And  should 
the  company  fail  to  make  good  the  impairment  within  a  given  time  it  would  be 
barred  from  doing  business  in  foreign  States  and  placed  in  the  hands  of  a  receiver 
in  the  home  State. 

The  valuation  laws  for  fraternal  beneficiary  societies  are  less  stringent.  The 
most  recent  enactments  have  been  given  (in  substance)  under  the  title  of  "The  New 
York  Conference  Bill,"  pages  66-72. 

The  second  example  will  exhibit  the  results  of  a  valuation  of  the  promised  ben- 
efits and  future  net  contributions  as  in  practice  actually  collected,  on  the  assumption 
of  whole  life  protection.  Instead,  however,  of  taking  the  tabular  net  premiums,  the 
contribution  rates  will  be 

For  age  18  annually  $7.20  per  $1,000. 
For  age  19  annually  $7.80  per  $1,000. 
For  age  20  annually  $8.00  per  $1,000. 
For  age  21  annually  $8.20  per  $1,000. 
For  age  22  annually  $8.40  per  $1,000. 

The  protection  for  each  age  and  year  of  entry  is  multiplied  by  the  rate  for  the 
age  of  entry.  That  is,  7.20  is  the  multiplier  for  79.5 ;  for  76.0 ;  for  74.0 ;  for  70.5 ;  for 
57.0;  and  for  46.0.  The  results  are  as  follows: 

PROTECTION  MULTIPLIED  BY  CONTRIBUTIONS. 


Entry 

Ag.es. 

1913. 

1912. 

1911. 

1910. 

1909. 

1908. 

Totals. 

18 
19 
20 
21 
22 

Totals  .  . 

572.40 
721.50 
704.00 
647.80 
579.60 

547.20 
737.10 
648.00 
541.20 
604.80 

532.80 
674.70 
728.00 
590.40 
512.40 

507.60 
592.80 
680.00 
606.80 
546.00 

410.40 
393.90 
440.00 
393.60 
537.60 

331.20 
530.40 
568.00 
467.40 
369.60 

2901.60 
3650.40 
3768.00 
3247.20 
3150.00 

3225.30 

3078.30 

3038.30 

2933.20 

2175.50 

2266.60 

16717.20 

Summing  diagonally  the  protection  and  the  products  of  protection  by  contributions, 
the  following  columns  of  protection  and  amount  of  one  year's  contributions  are 
obtained  for  attained  ages.  Then  multiplying  by  the  single  premiums  for  whole 
life  insurances  and  annuities  the  present  values  of  the  protection  and  future  contri- 
butions are  obtained. 

As  hereinbefore  explained,  for  a  valuation  as  of  December  31,  for  certificates 
written  in  every  month  of  the  year  of  issue,  the  single  premiums  for  insurances  and 
annuities  must  be  modified  to  give  "mean"  or  mid-year"  values. 


285 


In  the  following  it  is  assumed  that  the  certificates  were  issued  January  I  of  each 
year,  and  hence  terminal  values  are  given  by  using  the  whole  life  single  premiums  and 
annuities  taken  from  the  Table  in  the  Appendix.  $211.86  is  the  multpilier  for  the 
protection  at  attained  ages  18,  19  and  20;  $216.42  at  21 ;  .  .  .  $247.75  at  attained 
age  27.  The  whole  life  annuities  used  were  20.49  for  attained  ages  18,  19  and  20; 
^0.37  for  21 ;  .  .  .  19.56  for  27.  The  results  follow : 


Attained 
Age. 

Protection. 

Value  of 
Protection. 

One  Year's 
Contributions. 

Value  of 
Contribution. 

Required 
Accumulation. 

18 

79500 

16842.87 

572.40 

11728.48 

5114.39 

19 

168500 

35698.41 

1268.70 

25995.66 

9702.75 

20 

256500 

54342.09 

1973.90 

40445.21 

13896.88 

21 

317000 

68605.14 

2478.10 

50478.90 

18126.24 

22 

359000 

79396.44 

2852.00 

57753.00 

21643.44 

23 

325500 

73589.04 

2600.30 

52318.04 

21271.00 

24 

258000 

59647.02 

2089.60 

41771.10 

17875.92 

25 

184000 

43517.84 

1507.60 

29925.86 

13591.98 

26 

121000 

29285.63 

1005.00 

19808.55 

9477.08 

27 

44000 

10901.00 

369.60 

7229.38 

3671.62 

2113000 

471825.48 

16717.20 

337454.18 

134371.30 

The  present  value  of  $2,113,000  of  promised  death  benefits  is  found  to  be  $471,- 
825.48.  The  present  value  of  the  future  contributions  expected  to  be  received  on  the 
$2,113,000  of  protection  is  $337,454.18.  The  required  accumulation  to  balance  the 
present  values  is  $134,371.30.  The  latter  is  the  reserve  liability,  and  the  society 
should  have  in  possession  net  assets  equal  to  or  greater  than  this  liability  to  be  in  a 
technically  solvent  position. 

Had  I  taken  the  tabular  rates  of  contribution,  namely : 

For  age  18  annually  $10.34  per  $1,000. 
For  age  19  annually  $10.34  per  $1,000. 
For  age  20  annually  $10.34  per  $1,000. 
For  age  21  annually  $10.62  per  $1,000. 
For  age  22  annually  $10.92  per  $1,000. 

the  present  value  of  the  future  contributions  would  have  been  increased  and  the 
required  reserve  accumulation  decreased  to  $43,566.56,  being  identical  with  the 
amount  obtained  by  the  net  reserve  valuation.  The  curious  can  readily  test  the 
statement  by  multiplying  the  protection  by  the  above  rates  to  obtain  the  amount  of 
one  year's  contribution,  summing  diagonally  for  attained  ages  and  then  multiplying  by 
the  whole  life  annuities  as  before.  The  present  value  of  the  future  expected  net  con- 
tributions will  be  increased  to  $428,258.92,  which  subtracted  from  the  present  value 
of  the  protection,  $471,825.48,  will  give  the  required  accumulation  of  $43,566.56. 

It  will  be  noticed  that  the  change  in  contribution  rates  does  not  affect  the  value 
of  the  promised  benefits.  Neither  the  method  of  making  contributions  nor  their 
amount  have  anything  to  do  with  the  value  of  the  protection.  If  learned  this  would 
l)e  a  valuable  lesson  to  many  officials. 

Reference  is  again  made  to  the  fact  that  the  two  preceding  methods  are  known 
as  "Prospective  Valuations." 

The  past  is  not  considered. 

The  present  position  of  the  Society  or  company  is  determined,  and  then  it  is 
undertaken  to  forecast  the  future  and  bring  expected  future  claims  and  future  con- 


286 

tributions  to  present  money  worth,  and,  by  assuming  these  present  values  a  part 
of  the  present  position,  to  show  whether  or  not  the  Society  or  company  is  technically 
solvent. 

The  Prospective  Valuation  is  based  upon  estimates  and  assumptions. 

This  declaration  applies  equally  to  a  "Net  Reserve  Valuation"  and  to  a  valuation 
of  "Promised  Benefits"  and  of  "Future  Net  Contributions." 

The  third  example  illustrates  a  valuation  on  the  "Accumulation  Basis." 

Instead  of  using  the  u  and  k  columns  as  recommended  by  Mr.  Anderson  in  his 
book  explanatory  of  this  method  of  valuation  I  find  it  more  convenient  and  expedi- 
tious to  apply  directly  the  DUX  and  DKX  values. 

In  the  chapter  on  "Definitions"  I  have  given  the  formulas  for  the  u  and  k  col- 
umns and  for  the  nUx  and  nKx  accumulation  values.  In  previous  chapters  I  have 
also  given  the  formulas  by  which  these  columns  and  values  may  be  determined. 

A  valuation  on  the  "Accumulation  Basis"  is  a  "Retrospective  Valuation."  It  is 
looking  backward  and  reviewing  past  operation  and  making  an  exhibit  of  the  present 
position  as  developed  from  past  operation. 

Were  we  to  assume  that  the  past  mortality  experience  and  past  interest  earnings 
and  past  contributions  rates  were,  for  example,  according  to  the  National  Fraternal 
Congress  Table  of  Mortality  and  4  per  cent  interest,  then  a  "Retrospective  Valuation" 
would  bring  out  an  identical  reserve  liability  as  obtained  from  the  "Net  Reserve"  and 
"Tubular"  Valuations. 

However,  it  will  be  seen  from  the  following  exhibit  that  the  reserve  liability  will 
not  be  the  same  as  produced  by  the  "Tabular"  method  with  the  same  assumptions 
of  mortality  and  interest  and  contribution  fates,  where  the  latter  arc  not  the  contri- 
bution rates  derived  from  the  mortality  table  and  interest  rate  employed  in  the 
valuation. 

That  is  to  say,  were  we  to  value  the  annual  rates  $10.34,  $10.62  and  $10.92  for 
entry  ages  18,  19,  20,  21  and  22,  the  reserve  liability  by  the  "Accumulation"  method 
and  the  "Tabular"  method  would  be  identical  with  that  of  the  "Net  Reserve"  method. 

When  we  value  the  annual  rates  $7.20,  7.80,  $8.00,  $8.20  and  $8.40,  the  reserve 
liability  under  the  "Accumulation"  method  differs  from  that  of  the  "Tabular"  method, 
and  both  differ  from  that  of  the  "Net  Reserve"  method. 

Technically,  the  "Net  Reserve"  method  ignores  the  "contributions  as  in  practice 
actually  collected." 

Net  Reserve  Values  are  prepared  in  advance  of  valuation,  and  these  values  are 
computed  on  the  assumption  of  contribution  rates  deduced  from  the  standard  table 
of  mortality  and  designated  interest  rate. 

These  values  are  then  arbitrarily  fixed  by  law  as  the  measure  of  technical  solvency, 
and  hence  are  known  as  "legal  reserves." 

Therefore,  the  results  of  a  "Legal  Reserve,"  or  "Net  Reserve"  Valuation  are 
obtained  from  the  determination  of  the  reserve  liability,  and  whether  or  not  the 
net  assets  in  hand  are  equal  in  amount  to  such  reserve  liability. 

If  the  requisite  net  assets  are  in  possession  of  the  society  or  company  the  valua- 
tion requirements  are  met  and  no  questions  are  asked  concerning  the  contribution 
rates  "as  in  practice  actually  collected,"  nor  concerning  the  mortality  and  interest 
assumptions  employed  in  the  computation  of  rates  of  contribution.  However,  all  of 
these  facts  are  disclosed  in  the  "Gain  and  Loss  Exhibit"  required  of  life  companies. 

While  absolute  liberty  is  left  to  the  Society  or  company  in  respect  of  premiums 
or  contributions,  this  fact  should  never  be  forgotten:  The  Required  Reserve  Accu- 
mulation ivill  not  be  in  hand,  unless  the  Contribution  Rates,  as  in  practice  actually 


287 


collected,  have  been  computed  upon  the  same  (or  more  favorable}  Mortality  and 
Interest  Assumptions  used  in  the  Calculation  of  the  Net  Reserve  lvalues  prescribed 
as  Legal  Reserves. 

The  values  of  the  nUx  and  nKx,  on  the  basis  of  the  National  Fraternal  Congress 
Table  of  Mortality  and  4  per  cent  interest,  are  not  in  print,  and  so  far  as  I  am 
informed,  the  only  manuscript  tables  are  in  my  office.*  These  have  been  computed 
specially  for  "retrospective  valuations,"  particularly  under  provisions  of  Section  23!). 

There  is  a  separate  value  of  U  and  K  for  each  age  of  entry  and  year  of  duration 
(or  year  of  issue).  The  following  are  the  products  of  the  contribution  rates  by 
nUx  and  then  by  the  protection,  and  the  products  of  nKx  by  the  protection. 

The  results  in  the  first  instance  exhibit  the  accumulated  past  contributions  as 
credits  to  those  carrying  the  protection  in  force  at  date  of  valuation.  And  in  the 
second  instance,  the  accumulated  past  assumed  claims  chargeable  against  those  carry- 
ing the  protection  at  date  of  valuation. 

As  with  the  other  valuations,  I  do  not  use  modified  factors  for  "mid-year"  values 
in  obtaining  the  following  results : 

ACCUMULATED  VALUES  OF  PAST  CONTRIBUTIONS. 


Years  of  Entry 

Entry 

Ages. 

1913. 

1912. 

1911. 

1910. 

1909. 

1908. 

Totals. 

18 

598.16 

1169.91 

1747.58 

2271.00 

2348.72 

2327.67 

10463.04 

19 

753.97 

1575.92 

2213.02 

2652  .  19 

2254.29 

3727.65 

13177.04 

20 

735.68 

1385.42 

2387.84 

3042.32 

2518.12 

3991.90 

14061.28 

21 

676.95 

1157.09 

1936.51 

2715.43 

2252.57 

3285.35 

12023.90 

22 

605.68 

1293.06 

1681.18 

2443.35 

3077.22 

2598.29 

11698.78 

Totals  .  . 

3370.44 

6581.40 

9966.13 

13124.29 

12450.92 

15930.86 

61424.04 

ACCUMULATED  VALUES  OF  PAST  CLAIMS. 


1913. 

1912. 

1911. 

1910. 

1909. 

1908. 

18 
19 
20 
21 
22 

Totals  .  . 

399.89 
465.28 
442.64 
399.74 
351.90 

783.56 
974.30 
835.11 
685.74 
753.12 

1175.12 
1373.62 
1445.08 
1151.28 
983.32 

1531.97 
1651.48 
1847.05 
1620.60 
1435.20 

1590.30 
1408.95 
1534.50 
1349.76 
1815.68 

1578.26 
2333.08 
2436.01 
1977.33 
1540.44 

7059.10 

8206.71 
8540.39 
7184.45 
6879.66 

2059.45 

4031.83 

6128.42 

8086.30 

7699.19 

9865.12 

37870.31 

The  total  credits  in  the  way  of  accumulated  past  contributions  is  $61,424.04. 

The  total  charges  in  the  way  of  accumulated  past  claims  is  $37.870.31. 

The  net  fund  in  hand  to  equal  the  net  reserve  assumed  to  be  accumulated,  $23,- 
55373,  is  the  difference  between  the  totals  of  credits  and  charges. 

As  a  matter  of  fact,  the  actual  net  fund  in  hand  at  date  of  valuation  may  be 
(and  usually  is)  less  or  larger  than  this  difference  between  the  credits  and  charges. 

i.  The  past  mortality  may  have  been  more  or  less  favorable  than  assumed. 

*(Note.     Sets  of  the  nUx   and   nKx  values  can  be  purchased  at  a  reasonable  price.) 


288 

2.  The   interest   earnings  may  have  been  larger  or   less  than   assumed. 

3.  There  may  have  been    (and  usually  are)    forfeitures  of  accumulation  by  with- 
drawing members. 

4.  There  may  have  been   (such  things  have  been  known  to  occur)  transfers  from 
unusued  expense  funds  to  the  surplus  or  reserve  accumulation. 

5.  There  may  have  been   (and  under  past  society  conditions  almost  invariably  have 
been)  appropriations  of  contribution  excess  to  relieve  members  from  the  full  payment 
of  the  cost  of  their  protection. 

6.  There  may  have  been  losses  from  bad  investments,  or  from  other  causes. 

(a)  If  past  mortality  were  more  favorable  than  assumed,  the  actual  to  be  expected 
accumulation  should  be  increased.    The  reverse,  if  less  favorable. 

(b)  If  past  interest  earning  were  larger  than  assumed  the  actual  to  be  expected 
accumulation  should  be  increased.    The  reverse,  if  the  earning  were  less. 

(c)  If  there  were  forfeiture  of  accumulation  by  lapse,  the  accumulation  for  the 
persistent  survivors  should  be  increased. 

(d)  If  there  were  transfer  from  expense  fund  to  accumulation  the  latter  should 
be  larger  than  expected. 

(e)  If  there   were  appropriation   of   excess   of  contributions   over  insurance   cost 
for  the  use  of  members  who  paid  less  than  cost,  there  would  be  a  decrease  in  the 
actual  accumulation. 

(f)  If  there  were  loss  from  bad  investments,  or  otherwise,  the  actual  accumulation 
would  be  decreased  thereby. 

For  making  a  Retrospective  Valuation,  Mr.  Ekern,  the  Insurance  Commissioner 
of  Wisconsin  (the  author  of  Section  23b),  and  Mr.  Anderson,  the  Actuary,  have  rec- 
ommended modified  k  columns  for  use  in  fixing  the  claims  and  establishing  the 
charges.  These  modifications  are  worked  out  by  taking  percentages  of  the  qx  col- 
umns derived  from  some  standard  mortality  table.  They  also  recommended  an 
interest  rate  in  computing  u  which  approximates  the  interest  rate  actually  earned. 

These  recommendations,  if  followed,  would  produce  a  close  agreement  between 
the  actual  accumuation  and  that  obtained  by  valuation,  if  there  were  no  other  account- 
ing than  for  actual  death-rate  and  interest  rate. 

Speaking  from  a  large  experience  in  these  matters,  I  assert  that  items  3  and  5 
(c  and  e),  as  stated  above,  exert  more  influence  (in  the  majority  of  instances  5  (e) 
alone  is  more  potential)  than  I  (a)  and  2  (b)  combined. 

The  gains  from  forfeitures  by  lapse  (c)  are  never  very  large,  nor  is  the  loss 
from  bad  investments  or  otherwise  (f)  very  great,  but  the  appropriations  of  excess 
contributions  to  make  good  deficiencies  in  contribution  rates  (e)  reduce  to  a  con- 
siderable degree  the  percentage  of  the  actual  to  the  expected  accumulation. 

Hence,  if  the  recommendations  of  Mr.  Anderson  were  followed,  always  there 
would  be  necessary  an  adjustment  after  valuation  to  bring  actual  and  valuation  accu- 
mulation into  agreement. 

In  these  circumstances,  my  practice  is  to  make  the  valuation  by  use  of  the 
accumulation  factors  DUX  and  nKx,  based  on  some  standard  mortality  table  and 
rate  of  interest  that  most  nearly  approximate  the  actual  mortality  experienced  and 
interest  earned. 

The  accumulation  obtained  from  the  valuation  will  not  be  identical  with  the 
actual  accumulation  (and  neither  are  they  by  use  of  modified  k  columns).  The  two 
are  brought  into  agreement  by  arbitrary  adjustment;  or  I  simply  report  the  facts 
(my  invariable  course  to  the  Society),  exhibiting  a  surplus  or  deficiency  as  the  case 
may  be. 


289 

And  why  not? 

In  the  valuation  of  any  life  company  in  existence  has  it  ever  been  known  that 
the  reserve  accumulation  shown  in  the  valuation  was  identical  with  the  actual  net 
accumulation  ? 

It  is  practically  impossible  under  any  method  of  valuation  to  bring  out  results 
in  perfect  accord  with  the  facts. 

Therefore,  I  hold  that  the  direct  application  of  the  accumulation  factors,  nllx 
and  nKx,  is  preferable  in  practice  to  the  use  of  modified  valuation  columns,  for  cer- 
tainly it  is  more  simple  and  expeditious  and  the  difference  between  actual  and  ex- 
pected accumulation  for  adjustment  is  not  materially  larger  than  when  the  Anderson 
method  is  employed. 

I  intend  no  criticism  nor  reflection  upon  Mr.  Anderson's  method,  I  merely  ex- 
press a  preference  for  my  method,  and  state  the  reasons. 

Let  us  come  back  to  the  exhibit  for  the  Retrospective  Valuation,  which  has  been 
made  by  the  employment  of  accumulation  factors  derived  from  the  National  Fra- 
ternal Congress  Table  of  Mortality  and  4  per  cent  interest — the  same  assumptions 
as  in  the  other  two  valuations. 

It  is  shown  that  the  expected  accumulation  is  $23,553.73. 

If  the  actual  accumulation  is  larger,  the  surplus  arises  out  of  gains  and  savings 
from  sources  heretofore  indicated. 

If  the  actual  accumulation  is  smaller,  the  deficiency  has  been  created  by  one  or 
all  of  the  causes  hertofore  enumerated. 

In  either  case  the  results  of  the  Retrospective  Valuation  clearly  indicates  the 
course  of  past  operation,  and  with  its  detailed  information  is  singulary  suited  as  a 
guide  for  making  adjustments  in  establishing  equitable  relations  between  the  members, 
and  equally  so  for  making  readjustments  of  contribution  rates  to  assure  future 
solvency. 

Without  the  results  of  a  Retrospective  Valuation,  it  is  difficult,  if  not  almost 
impossible,  to  make  a  satisfactory  apportionment  of  accumulated  funds  amongst  mem- 
bers contributing  at  rates  inadequate  for  the  promised  benefits. 

When  a  Society  has  two  classes  of  members  with  one  contributing  at  rates  as- 
sumed to  be  adequate  to  provide  for  the  benefits  promised,  and  the  other  contributing 
at  rates  admitted  to  be  inadequate,  or  where  such  separation  is  contemplated,  the  inad- 
equate rate  certificates  should  be  valued  by  the  retrospective  method.  This  suggestion 
is  independent  of  the  acceptance  of  the  provisions  of  Section  23b  in  respect  of  appor- 
tioning credits  and  charges  with  a  view  to  collecting  the  excess  of  charges  in  the 
way  of  increased  assessments. 

In  the  chapter  on  "Definitions,"  where  I  review  Valuations,  it  is  stated  that  a 
Prospective  Valuation  becomes  a  farce  and  of  no  effect  when  there  is  a  great  differ- 
ence between  the  values  of  promised  benefits  and  future  contributions,  and  therefore, 
I  have  asserted — and  now  repeat  the  assertion  after  further  deliberation — that  the 
Retrospective  Valuation,  in  such  cases,  alone  will  be  educational,  or  can  be  turned  to 
practival  advantage. 

For  Fraternal  Beneficiary  Societies  the  Retrospective  Valuation  generally  is  to 
be  preferred  to  the  Prospective  Valuation. 

The  Net  Reserve  method  of  valuation  is  applicable  entirely  to  very  few  fraternal 
societies,  because  few  have  all  members  on  adequate  rates.  Further  than  this,  the 
results  of  a  Net  Reserve  Valuation  give  less  information  than  those  of  other  methods, 
and  are  not  as  effective  for  educational  purposes.  And  still,  further,  because  of  the 
varied  and  exceptional  contract  conditions  of  fraternal  society  certificates,  the  ordi- 
nary reserves  to  be  had  in  book  form  are  not  applicable,  and  hence  special  tables 


290 

must  be  prepared  for  individual  societies,  which  is  a  much  more  expensive  work  than 
preparing  single  premiums  for  insurances  and  annuities  for  a  "Tabular"  valuation. 

For  a  valuation  on  the  "Accumulation  Basis"  the  nUx  and  nKx  factors  can  be 
employed  for  almost  any  form  of  certificate  providing  for  a  death  benefit  only,  or 
death  and  old  age  benefit. 

Of  course,  in  any  case,  values  must  be  derived  from  combined  death  and  dis- 
ability tables  where  combined  death  and  disability  benefits  are  promised. 

To  be  more  explicit  concerning  the  different  results  obtained  by  the  different 
methods  of  valuation  specific  comparisons  will  be  made. 

First,  the  "Net  Reserve"  Valuation,  assuming  tabular  premiums  and  death  rate 
and  4  per  cent  interest,  shows  a  required  accumulation  of  $43,566.56  on  the  $2,113,000 
whole  life  protection  outstanding  at  the  date  of  valuation,  for  entry  ages  18,  19,  20, 
21  and  22,  and  issued  in  the  years  1913,  1912,  1911,  1910,  1909  and  1908  as  of  January 
i  of  each  year,  and  valued  as  of  December  31,  1913. 

The  meaning  is,  that  tabular  reserves  per  $1,000,  previously  prepared,  were  em- 
ployed as  multipliers  to  obtain  corresponding  reserves  on  the  thousands  of  protection 
in  force;  and  according  to  arbitrary  assumptions  of  mortality  and  interest  the  total 
required  accumulation  is  $43,566.56,  and  that  if  this  amount,  above  all  accrued  liabil- 
ities and  debts,  is  not  in  hand  the  Society  is,  to  the  degree  of  deficiency,  technically 
insolvent. 

The  "Net  Reserve"  is  a  Prospective  Valuation  in  effect,  because  the  accumulation 
of  $43,566.56  is  required  to  supplement  future  contributions  in  order  to  provide  for 
the  promised  benefits  under  the  $2,113,000  of  protection. 

Second.  The  (so-called)  "Tabular"  Valuation  assumes  tabular  death  rate  and  4 
per  cent  interest  for  the  future,  but  assumes  contributions  less  than  the  tabular,  and 
shows  a  required  accumulation  of  $134,371.30  on  the  $2,113,000  of  whole  life  protection. 

The  meaning  is,  that  the  present  money  worth  of  $2,113,000  of  whole  life  protec- 
tion—the present  value  of  the  Benefit  Side  of  the  insurance  contracts  is  $471,825.48, 
while  the  present  money  worth  of  all  future  contributions  expected  to  be  received — 
the  present  value  of  the  Payment  Side  of  the  insurance  contracts — is  $337,454.18; 
and  if  the  Society  has  not  the  difference,  $134,371.30,  between  these  present  values, 
then  it,  to  the  degree  of  the  deficiency,  is  technically  insolvent. 

In  other  words,  it  is  arbitrarily  expected  that  the  death  rate  and  interest  rate 
for  the  future  will  be  on  the  average  identical  with  the  assumed  in  the  valuation, 
and  that  the  present  contribution  rates  will  continue.  Under  these  assumptions  there 
should  be  in  hand,  at  date  of  valuation,  $134,371.30  to  supplement  future  contributions 
in  order  to  provide  for  the  promised  benefits  under  the  $2,113,000  of  Whole  Life  pro- 
tection. 

Third.  The  valuation  on  the  "Accumulation  Basis"  assumes  tabular  death  rate  and 
4  per  cent  interest  in  past  operation,  but  assumes  contributions  in  the  past  less  than 
tabular  premiums,  and  shows  that  $23,553.73  should  have  been  accumulated  on  $2,113,- 
ooo  during  past  operation  to  the  date  of  the  valuation. 

The  meaning  is,  that  if  the  past  mortality  had  been  according  to  the  National 
Fraternal  Congress  Table,  and  had  4  per  cent  been  earned  on  invested  funds,  and  the 
annual  net  contributions  as  stated,  then  the  Society  should  have  in  hand  $23,553.73. 

From  the  meaning  of  the  three  valuations  let  us  determine  the  value  of  the 
information  derived  from  each — and  it  is  to  be  supposed  that  the  prime  object  of  a 
valuation  is  the  information  to  be  derived  therefrom  for  some  specific  purpose  on  the 
part  of  Insurance  Commissioners  as  well  as  on  part  of  officers  and  members  of 
societies  and  companies. 


291 

The  Net  Reserve  Valuation  gives  the  least  information  for  practical  purposes. 
The  usual  method  of  making  the  valuation  is  not  that  given  in  the  foregoing  illustra- 
tion, but  reserve  values  are  entered  upon  cards  and  the  amounts  listed  on  adding 
machines,  and  the  final  total  is  reported  as  the  reserve  liability.  The  information  given 
by  a  Net  Reserve  Valuation  is  little  more  than  a  mere  announcement  of  an  assumed 
accumulation  requirement  for  expected  conditions  arbitrarily  anticipated. 

There  is  more  of  material  information  in  the  results  obtained  from  the  (so-called) 
"Tabular"  Valuation.  It  exhibits  the  present  worth  of  the  insurance  liability  and  the 
present  worth  of  the  contribution  assets,  and  thus  is  more  readily  understood  by  the 
average  man.  It  is  educational  in  effect,  because  anyone  can  be  made  to  see  that 
by  increasing  the  contribution  rate  there  is  a  corresponding  increase  in  the  present 
worth  of  future  contributions,  because  a  higher  rate  must  have  a  greater  value.  If 
the  assumptions  of  future  death  rate  and  interest  rate  are  conservative,  the  results  of 
the  "Tabular"  valuation  may  be  relied  upon  as  a  safe  index  for  future  operation, 
and  a  sure  monitor  against  inadequate  rates.  The  usual  form  that  exhibits  the  value 
of  protection  and  contributions  by  attained  ages  is  more  or  less  misleading.  To  in- 
stance :  For  attained  age  23  there  is  shown  the  amount  of  $325,500  of  protection,  being 
the  sum  total  of  $72,000  issued  at  22  in  1912;  $72,000  at  21  in  1911;  $85,000  at  20  in 
1910;  $50,500  at  19  in  1909;  and  $46,000  at  18  in  1908.  Similarly,  the  present  value  of 
$325,500  of  insurance  is  the  total  of  present  values  of  these  amounts  issued  at  different 
ages  and  in  different  years.  Likewise,  the  present  value  of  contributions  at  attained 
age  23  is  the  total  of  the  present  value  of  contributions  at  different  contribution  rates. 
The  exhibit  of  this  latter  condition  is  misleading,  because  for  the  same  attained  age 
some  members  might  be  contributing  at  rates  that  create  deficiencies  while  others 
might  be  contributing  at  rates  yielding  a  surplus  over  current  insurance  cost  at  the 
attained  age.  Notwithstanding  this  all  are  thrown  together  at  the  one  attained 
age,  and  their  combined  contributions  valued  by  taking  the  annuity  at  that  age  for 
the  common  multiplier. 

The  valuation  on  the  "Accumulation  Basis"  accumulates  the  past  actual  contribu- 
tions made  by  the  members.  True,  this  accumulation  is  on  the  assumption  of  mor- 
tality and  interest  only  approximating  the  actual,  nevertheless  it  tells  the  tale  of  past 
operation  in  a  way  that  can  be  generally  understood  and  appreciated.  Then  it  accu- 
mulates the  past  claims  to  the  date  of  the  valuation  which  are  justly  and  equitably  an 
offset  to  the  accumulated  contributions.  This  is  readily  understood  upon  the  mere 
suggestion  that  past  operation  consists  in  collecting  money  in  the  way  of  contributions 
and  paying  out  money  in  the  way  of  claims.  Therefore,  if  surviving  members  at  the 
date  of  valuation  are  given  credit  to  the  full  value  of  past  contributions  they  should 
be  charged  with  the  full  value  of  their  share  of  past  claims.  It  is  then  plain  that 
if  their  accumulated  contributions  exceed  the  amount  of  their  accumulated  share  of 
past  claims  they  should  have  a  net  surplus  to  their  credit.  On  the  other  hand,  if  the 
accumulated  claims  exceed  the  amount  of  accumulated  contributions  a  deficiency  has 
been  created;  and  then  it  is  not  difficult  to  understand  that  if  all  claims  from  con- 
tributions received  have  been  paid  to  the  date  of  the  valuation,  that  the  excess  in 
contributions  of  some  members  has  been  appropriated  to  make  good  the  deficiencies 
created  by  other  members.  From  an  examination  of  the  valuation  sheet  on  the 
"Accumulation  Basis"  one  can  place  the  finger  upon  the  group  of  members,  by  ages 
and  years  of  entry,  who  have  paid  more  and  who  have  paid  less  than  cost  of  protection. 
The  present  status  of  each  member  is  disclosed  as  developed  from  past  operation.  We 
must  judge  the  future  by  the  past,  and  our  judgment  is  obviously  strengthened  by 
having  laid  before  us  the  present  position  as  brought  about  by  past  operation.  We 


292 


are  better  equipped  to  forecast  the  future  after  studying  the  results  of  a  Retrospective 
Valuation,  and  certainly  better  informed  for  formulating  a  plan  of  readjustment  for 
future  operation. 

If  contribution  rates  are  adequate  to  provide  for  the  benefits  promised  it  is  imma- 
terial as  to  the  choice  of  methods  for  valuation.  If  net  reserves  are  at  hand,  the 
Net  Reserve  method  involves  the  least  work  and  time. 

However,  the  majority  of  subscribers  to  this  book  are  officials  of  fraternal  bene- 
ficiary societies,  and  I  am  trying  to  present  the  case  primarily  for  their  benefit.  Be- 
cause of  this,  I  make  two  more  examples.  The  same  amounts  of  protection  and  the 
same  assumptions  as  to  mortality  and  interest,  and  the  same  annual  contribution  rates, 
$7.20,  $7.80,  $8.00,  $8.20  and  $8.40  are  employed,  but  the  ages  of  entry  will  be  taken  in 
the  first  example  as  38,  39,  40,  41  and  42,  and  as  48,  49,  50,  51  and  52.  I  will  repeat  the 
examples  given  for  18,  19,  20,  21  and  22.  The  "Tabular"  and  "Accumulation  Basis" 
methods  will  be  illustrated : 

PROSPECTIVE  VALUATION. 


Attained 
Age. 

Amount  of 
Protection. 

Present  Value 
of  Protection. 

Amount  of 
1  Assessment. 

Present  Value 
of  Future  Con- 
tributions. 

Required 
Accumulation. 

18 

$  79500 

$16842.87 

$  572.40 

$11728.48 

$  5114.39 

19 

168500 

35698.41 

1268.70 

25995.66 

9702.75 

20 

256500 

54342.09 

1973.90 

40445.21 

13896.88 

21 

317000 

68605.14 

2478.10 

50478.90 

18126.24 

22 

359000 

79396.44 

2852.00 

57753.00 

21643.44 

23 

325500 

73589.04 

2600.30 

52318.04 

21271.00 

24 

258000 

59647.02 

2089.60 

41771.10 

17875.92 

25 

184000 

43517.84 

1507.60 

29925.86 

13591.98 

26 

121000 

29285.63 

1005.00 

19808.55 

9477.08  • 

27 

44000 

10901.00 

369.60 

7229.38 

3671.62 

$2113000 

$471825.48 

$16717.20 

$337454  18 

$134371.30 

38 

$  79500 

$  25909.05 

$  572.40 

$  10034.17 

$  15874.88 

39 

168500 

56359.88 

1268.70 

21948.51 

34411.37 

40 

256500 

88059.02 

1973.90 

33694  .  47 

54364.55 

41 

317000 

111710.80 

2478.10 

41731.20 

69979  .  60 

42 

359000 

129864.66 

2852.00 

47314.68 

82549.98 

43 

325500 

120867.92 

2600.30 

42514.91 

78353.01 

44 

258000 

98339.28 

2089.60 

33621.66 

64717.62 

45 

184000 

71990.00 

1507.60 

23865.31 

48124.69 

46 

121000 

48592.39 

1005.00 

15637.80 

32954.59 

47 

44000 

18136.36 

369.60 

5647.49 

12488.87 

2113000 

769829.36 

16717.20 

276010.20 

493819.16 

48 

$  79500 

$  33632.48 

$  572.40 

$  8586.00 

$  25046.48 

49 

168500 

73157.65 

1268.70 

18662.58 

54495.07 

50 

256500 

114278.45 

1973.90 

28463.64 

85814.81 

51 

317000 

144913.38 

2478.10 

34965.99 

109947.39 

52 

359000 

168360.23 

2852.00 

39386.12 

128974.11 

53 

325500 

156578.52 

2600.30 

35078.05 

121500.47 

54 

258000 

127273.98 

2089.60 

27520.03 

99753.95 

55 

184000 

93065.36 

1507.60 

19372.66 

73692.70 

56 

121000 

62733.66 

1005.00 

12582.60 

50151.06 

57 

44000 

23377.20 

369.60 

4505.42 

18871.78 

$2113000 

$997370.91 

$16717.20 

$229123.00 

$768247.82 

293 


RETROSPECTIVE  VALUATION. 
Accumulated  Contributions. 


Entry 

Ages. 

1913. 

1912. 

1911. 

1910. 

1909. 

1908. 

Totals. 

IS 
19 
20 
21 
22 

Totah  .. 

$598.16 
753.97 
735.68 
676.95 
605.68 

$1160.91 
1575.92 
1385.42 
1157.09 
1293.06 

$1747.58 
2213.02 
2387.84 
1936.51 
1681.18 

$2271.00 
2652.19 
3042.32 
2715.43 
2443.35 

$2348.72 
2254  .  29 
2518.12 
2252.57 
3077.22 

$2327.67 
3727.65 
3991.90 
3285.35 
2598.29 

$10463.04 
13177.04 
14061.28 
12023.90 
Ilp98.78 

$3370.44 

$6581.40 

$9966.13 

$13124.29 

$12450.92 

$15930.86 

$61424.04 

Accumulated  Claims. 


Entry 

Ages. 

1913. 

1912. 

1911. 

1910. 

1909. 

1908. 

Totals. 

18 
19 
20 
21 
22 

Totals  .  . 

$  399.89 
465.28 
442.64 
399.74 
351.90 

$  783.56 
974.30 
835.11 
685.74 
753.12 

$1175.12 
1373.62 
1445.08 
1151.28 
983.32 

$1531.97 
1651.48 
1847.05 
1620.60 
1435.20 

$1590.30 
1408.95 
1534.50 
1349.76 
1815.68 

$1578.26 
2333.08 
2436.01 
1977.33 
1540.44 

$7059.10 
8206.71 
8540.39 
7184.45 
6879.66 

$2059.45 

$4031.83 

$6128.42 

$8086.30 

$7699.19 

$9865.12 

$37870.31 

Accumulated  Contributions. 


Entry 

Ages. 

1913. 

1912. 

1911. 

1910. 

1909. 

1908. 

Totals. 

38 
39 
40 
41 
42 

Totals  .  . 

$  601.02 
757.58 
739.20 
680.19 
608.58 

$1171.01 
1577.39 
1393.20 
1163.58 
1300.32 

$  1752.91 
2219.76 
2402.40 
1948.32 
1690.92 

$  2284.20 
2667.60 
3066.80 
2736.67 
2462.46 

$  2363.90 
2272.80 
2538.  8Q 
2275.01 
3112.70 

$  2348.21 
3765.84 
4038.48 
3327.89 
2635.25 

$10521.25 
13260.97 
14178.88 
12131.66 
11810.23 

$3386.57 

$6605.50 

$10014.31 

$13217.73 

$12563.21 

$16115.67 

$61902.99 

Accumulated  Claims. 


Entry 
Ages. 

1913. 

1912. 

1911. 

1910. 

1909. 

1908. 

Totals. 

38 
39 
40 
41 
42 

Totals  .  . 

$  535.83 
644.73 
635.36 
592.50 
540.27 

$1066.28 
1372.14 
1220.67 
1035.54 
1180.08 

$1622.08 
19G5.2S 
2149.42 
1773.36 
1570.14 

$2148.14 
2404.64 
2800.75 
2544.86 
2336.75 

$2266.89 
2088.68 
2371.05 
2161.44 
3015.68 

$2294.02 
3531.24 
3846.78 
3229.05 
2610.96 

$  9933.24 
12006.71 
13024.03 
11336.75 
11253.88 

$2948.69 

$5874.71 

$9080.28 

$12235.14 

$11903.74 

$15512.05 

$57554.61 

294 


Accumulated  Contributions. 


Entry 
Ages. 

1913. 

1912. 

1911. 

1910. 

1909. 

1908. 

Totals. 

48 
49 
50 
51 
52 

Totals  .  . 

$  601.48 
758.59 
740.61 
082.00 
610.67 

$1179.87 
1590.74 
1399.94 
1170.51 
1309.69 

$1769.11 
2243.31 
2424  .  02 
1969.10 
1712.03 

$2308.82 
2701  .  15 
3104.68 
2776.60 
2504.39 

$2399.12 
2308.02 

2584.82 
2318.78 
3177.16 

$2390.90 
3840.15 
4125.67 
3407.25 
2705.14 

$10649.30 
13441.96 
14379.74 
12324.24 
12019.08 

$3393.35 

$6650.75 

$10117.57 

$13395.64 

$12787.90 

$16469.11 

$62814.32 

Accumulated  Claims. 

Entry 

Ages. 

1913. 

1912. 

1911. 

1910. 

1909. 

1908. 

Totals. 

48 
49 
50 
51 
52 

Totals  .  . 

$  806.13 
1011.95 
1019.04 
971.70 
901.83 

$1660.60 
2182.01 
1982.88 
1717.32 
2042.64 

$  2557.44 
3165.90 
3536.26 
2979.36 
2693.15 

$  3431.94 
3923.88 
4668.20 
4334.18 
4069.65 

$  3668.52 
3453.70 
4007.30 
3736.32 
5336.32 

$  3763.26 
5921.44 
6599.45 
5670.93 
4697.88 

$15887.89 
19658.88 
21813.13 
19409.81 
19741.47 

$4710.65 

$9585.45 

$14932.11 

$20427.85 

$20202.16 

$26652.96 

$96511.18 



Note  the  fact  of  the  same  amounts  of  protection  and  the  same  amounts  for  one 
assessment  in  the  three  age-groups  of  the  'Tabular"  Valuation,  and  then  observe  how 
the  value  of  protection  increases  and  the  value  of  future  contributions  decreases  with 
the  advance  in  age. 

The  value  of  $79,500  of  protection  at  age  18  is  $16,842.87,  and  the  .value  of  future 
contributions  $11,728.48.  At  age  48  the  value  of  $79,5oo  is  $33,632.48,  and  the  future 
contributions  $8,586.  The  required  accumulation  at  age  18  is  $5,114.39,  and  at  age 
48  is  $25,046.48.  For  the  age-group  18-27  it  is  $134,371.30,  while  for  48-57  it  is 
$768,247.82. 

There  can  be  no  better  illustration  than  this  of  the  increase  in  cost  of  protection 
with  increase  in  age. 

The  striking  feature  of  the  Prospective  Valuation  is  the  increased  differences. 
with  increased  attained  ages,  between  the  present  values  of  future  expected  claims 
and  the  present  values  of  the  future  expected  contributions. 

Rerriember  that  in  the  Prospective  Valuation  we  bring  all  expected  liabilities  and 
assets  to  the  present  age.  We  ignore  the  results  of  past  operation.  We  have  regard 
only  for  anticipated  results  in  an  attempt  to  forecast  the  future.  Observe  that  the 
greater  the  value  of  expected  future  claims  the  smaller  the  value  of  the  expected 
future  contributions,  and  that  the  latter  decrease  with  the  advance  in  age. 

Now  turn  to  the  study  of  the  valuation  on  the  "Accumulation  Basis." 

The  striking  feature  of  this  valuation  is  the  increase  in  the  value  of  accumulated 
contributions  with  advance  in  age,  notwithstanding1  the  same  rate  for  corresponding 
ages  of  each  group. 

The  total  for  entry  age  18  and  all  years  of  issue  is  $10,463.04;  for  entry  age  38 
the  total  is  $10,521.25;  and  for  age  48  it  is  $10,649.30. 

For  the  year  1913  and  the  groups  of  ages  18-22,  38-42  and  48-52,  the  respective 
totals  are  $3,370.44,  $3,386.57  and  $3,393-35- 


295 


Why  should  the  present  value  of  future  contributions  decrease  with  the  increase 
in  age,  while  the  accumulated  value  of  past  contributions  increase  with  the  increase 
in  age? 

The  answer  to  this  question  can  be  found  in  previous  pages  to  which  reference 
is  directed — especially  where  I  dwell  at  some  length  on  "Mortuary  Accretions"  and 
their  potency  at  advanced  ages. 

There  can  be  no  surprise  by  the  exhibit  of  increase  with  age  in  accumulated  claims. 
Nor  in  the  fact  that  the  accumulated  claims  exceed  the  accumulated  contributions  at 
the  advanced  ages. 

Note  the  Summary : 


Entry  Ages. 

Accumulated 
Contributions. 

Accumulated 
Claims. 

Differences 

18-22 
38-42 

48-52 

$61,424.04 
61,902.99 
62,814.32 

$37,870.31 
57,554.61 
96,511.18 

$23,553.73 
4,348.38 
33,696.86 

The  summary  indicates  the  most  important  of  all  the  lessons  in  insurance  that 
may  be  learned  from  the  study  of  the  valuation  by  the  Accumulation  method. 

Here  is  clearly  demonstrated  the  need  for  extra  assessments  or  the  readjustment 
of  rates  of  contribution  which  has  come  to  every  Society  fifteen  years  in  operation. 

The  accumulated  past  contributions  for  the  age  group  18-22  exceed  the  accumu- 
lated past  claims  by  $23,553.73. 

The  accumulated  past  claims  for  the  age  group  48-52  exceed  the  accumulated  past 
contributions  by  $33,696.86. 

The  excess  of  contributions  and  increment  on  $2,113,000  of  protection  at  the 
young  ages  18-22  lacks  $10,143.13  of  being  sufficient  to  make  good  the  deficiencies  in 
contributions  on  $2,113,000  of  protection  at  ages  48-52. 

This  disclosure  by  a  valuation,  which  exhibits  the  present  situation  as  developed 
through  past  operation,  discovers  to  any  average  intellect  the  cause  of  failure  where 
an  insurance  business  is  run  upon  the  principle  of  appropriating  from  the  young  for 
the  benefit  of  the  old.  The  ever-increasing  demands  of  the  latter  eventually  over- 
burden the  former  and  drive  them  away  and  others  cannot  be  found  to  take  their 
places. 

The  Retrospective  Valuation,  taken  alone,  gives  more  valuable  infornnation.  Taken 
with  the  Prospective  Valuation  complete  information  is  given. 

The  valuation  laws   recently  enacted  allow  the  option  of  either  method. 

Probably   this    opinion    of   the   privileges    granted    should   be    modified    by    stating' 
that  the  Commissioners  of  three  States  construe  the  valuation  provisions  of  the  laws 
following  the  "Mobile  >Bill"  to  require  either  the  "Net  Reserve"  or  the   (so-called) 
"Tabular"  valuation,  and  as  excluding  the  valuation  on  the  "Accumulation  Basis." 

Without  stretching  to  any  dangerous  degree  the  power  of  discretion  granted  to 
every  Insurance  Commissioner,  the  provisions  of  the  Mobile  Bill  will  allow  a  valua- 
tion on  the  "Accumulation  Basis."  The  provision  is  express  that  "the  valuation  may 
show  the  net  value  of  the  certificates  subject  to  valuation." 

Certainly  the  difference  between  the  accumulated  past  contributions  and  accu- 
mulated past  claims  is  the  "net  value"  of  the  certificates. 

No  Commissioner  will  controvert  that  statement,  but  it  is  contended  that  "net 
value"  has  been  known  as  the  "difference  between  the  present  value  of  future  claims 


296 

and  the  present  value  of  future  contributions,"  and  so  hoary  with  age  is  this  definition 
that  it  would  be  unpardonable  disrespect  to  accept  any  other. 

The  superiority  of  the  accumulation  method  in  respect  of  information  concerning 
fraternal  Society  conditions  should  commend  it  to  every  Commissioner  of  Insurance 
even  to  the  extent  of  accepting  as  "net  value"  the  difference  between  the  present 
value  of  past  contributions  and  the  present  value  of  past  claims. 

The  acceptance  of  a  valuation  on  the  "accumulation  basis"  does  not  necessarily 
carry  with  it  an  acceptance  of  all  of  the  provisions  of  Section  2$b  of  the  "New  York 
Conference  Bill." 

The  valuation  may  be  made  on  the  "Accumulation  Basis"  without  following  it 
with  an  "apportionment"  of  accumulated  funds. 

To  make  an  apportionment  of  the  accumulated  funds  is  to  make  a  readjustment 
of  the  relations  between  members. 

A  valuation  followed  by  readjustment  was  no.  doubt  contemplated  by  the  author 
of  Section  2^b.  However,  the  provisions  of  the  Bill  permit  a  valuation  on  the 
"Accumulation  Basis"  without  a  readjustment. 

I  am  not  saying  that  valuation  and  readjustment  is  less  desirable — as  a  fact,  it  is 
preferable  to  valuation  without  apportionment  and  readjustment. 

The  point  is  that  the  merits  of  a  Retrospective  Valuation  should  cause  its  adop- 
tion as  the  best  method  for  fraternal  societies  (in  their  present  condition),  and 
without  reference  to  its  peculiar  adaptability  to  an  apportionment  of  accumulated 
funds  and  the  establishing  of  equitable  relations  between  members  in  respect  of  con- 
tributing according  to  insurance  risk. 

SECTION  236. 

The  Mobile  Bill,  as  hereinbefore  stated,  provides  for  valuations  by  the  "Net  Re- 
serve," or  the  (so-called)  "Tabular"  methods.  At  a  conference  in  New  York,  De- 
cember 4,  1912,  amendments  were  agreed  to,  and  the  Bill,  as  amended,  is  given  (in 
substance)  at  pages  66-72. 

At  a  second  conference  in  New  York,  December  15,  1913,  additional  amendments 
were  agreed  to  as  follows,  in  respect  of  Section  23b : 

First.  That  the  first  paragraph  of  Section  23b  of  said  conference  bill  be  amended 
by  inserting  after  the  words  "to  cover  his  share  of  the  losses"  in  the  third  line  from 
the  end  in  the  printed  copy,  the  following  words,  first  changing  the  period  to  a  comma : 
"and  if  the  credit  at  the  time  any  benefit  becomes  payable  during  the  lifetime  of  the 
member,  including  any  available  funds,  does  not  equal  such  benefit,  the  contributions 
;;o  be  made  by  him  or  on  his  behalf  shall  be  increased  by  the  difference." 

Second.  By  striking  out  the  sixth  and  seventh  paragraphs  of  said  bill  as  printed, 
and  substituting  therefor  the  following: 

"A  table  showing  the  rates  being  paid  by  and  the  credits  to  indi- 
vidual members  at  each  age  and  year  of  entry,  and  showing  opposite 
each  credit  the  tabular  rate  and  the  tabular  reserve  on  a  level  rate 
equivalent  to  that  being  paid,  according  to  assumptions  for  mortality 
and  interest  recognized  by  the  laws  of  this  State  and  adopted  by  the 
Society,  and,  in  either  case,  including  any  benefit  payable  at  a  specified 
age  or  on  account  of  old  age  disability,  shall  be  filed  by  the  Society 
with  each  annual  report  and  also  be  furnished  to  each  member  before 
July  ist  of  each  year." 

"In  lieu  of  the  aforesaid  statement  there  may  be  furnished  to  each 
member  within  the  same  time  a  statement  giving  the  data  aforesaid  for 
such  member.  No  table  or  statement  need  be  made  or  furnished  when 
the  reserves  are  maintained  on  the  tabular  basis." 


297 


The  amendments  so  recommended  are  for  the  purpose  of  making  the  section  more 
specific  and  definite,  and  to  prevent  misunderstandings  which  have  arisen  with  regard 
to  the  purpose  and  intent  of  the  section. 

The  Committee  on  Fraternal  Insurance  for  the  Insurance  Commissioners'  Con- 
vention reported  (and  the  recommendation  was  adopted,  subject  to  such  changes  and 
corrections  as  might  be  made  by  the  Committee  on  Statutory  Legislation  for  the 
National  Fraternal  Congress)  the  following  form  of  valuations  under  Section  2$h : 

TABLE  OF  CREDITS 


For  the 

for  certificates  of  $1,000.00  on  the 


As  of  December  31,  191 

(Name  of  Society.) 
Year  of  Issue. 


plan. 


19 

13. 

19 

12. 

19 

11. 

Etc. 

Age. 

Present 
Rate  and 
Credit. 

Required 
Rate  and 
Reserve. 

Present 
Rate  and 
Credit. 

Required 
Rate  and 
Reserve. 

Present 
Rate  and 
Credit. 

Required 
Rate  and 
Reserve. 

Etc. 

16 

17 

18 

Etc. 

The  valuer  must  state  whether  or  not  account  has  been  taken  of  contributions 
or  reserves  made,  or  held,  or  required  to  be  made  or  held  for  sickness,  accident,  or 
other  benefits  than  mentioned  in  the  body  of  the  report. 

He  must  state  whether  or  not  the  credits  and  reserves  have  been  calculated  to  the 
last  anniversary  of  the  certificates,  or  must  specify  the  time  to  which  they  have 
been  calculated. 

The  Committee  added  the  following  explanatory  statements  and  notes : 

"Any  member  may  find  the  figures  for  his  certificate  by  following  down  the  col- 
umns for  his  year  of  entry  to  the  horizontal  lines  for  his  age  at  entry. 

"The  table  shows  the  ('monthly)  rates  being  paid  by,  and  the  present  credits  to, 
members  holdings  certificates  on  the  (2whole  life  plan)  at  each  age  and  year  of 
entry;  and  for  purposes  of  comparison  shows  opposite  such  rate  and  credit  (3the 
tibular  entry  age,  monthly  rate  required  to  'be  paid  and  the  tabular  reserve  now 

required),  assuming  a  death  rate  equal  to  the  = —  table  of  mortality  and  interest 

at  the  rate  of  -  — per  cent  in  order  to  provide  the  death  benefit  (*four  or  5five) 
promised  in  the  contract  upon  a  certificate  for  $1,000.  The  credit  of  the  member  is 
the  balance  from  contributions  made  by  him,  or  in  his  behalf,  and  his  share  of 
interest  earnings  after  deducting  his  cost  of  insurance  for  his  share  of  the  actual 
death  claims. 

"If  the  credit  and  contribution  made  by  or  on  behalf  of  a  member  shall  together 
be  insufficient  to  pay  his  share  of  the  actual  death  claims  for  any  year,  the  contri- 
bution to  be  made  by  him  or  on  his  behalf  for  said  year  shall  be  increased  by  the 
difference." 

Note  i.  In  the  proper  case,  substitute  the  word  "quarterly"  or  "annual"  for 
"monthly." 

Note  2.  In  the  proper  case,  substitute  for  the  words  "whole  life,"  the  words 
descriptive  of  the  plan  covered  by  this  table. 

Note  3.  The  Society  may,  at  its  option,  substitute  for  the  words  included  in  the 
parenthesis  the  following  words :  "The  reserve  that  should  be  in  hand  if  the  present 
rate  is  not  to  be  increased." 


298 

Note  4.    According  to  the  facts,  add  "and  the  benefit  payable  at  age ." 

Note  5.  According  to  the  facts,  add  "and  the  benefit  payable  on  account  of 
old  age  disability." 

Note  6.  Where  Note  4  or  5  applies,  add  to  the  paragraph  above  which  begins: 
"If  the  credit  and  contribution"  the  following  words,  "and  if  the  credit  at  the 
time  any  benefit  becomes  payable  during  the  lifetime  of  the  member,  including  any 
available  funds,  does  not  equal  such  benefit,  the  contribution  to  be  made  by  him  or 
on  his  behalf  shall  be  increased  by  the  difference." 

The  committee  further  recommends  that  the  reports  to  the  several  insurance 
departments  made  by  the  societies  which  elect  to  value  under  Section  2$b  contain  a 
similar  table  to  the  above,  showing  for  each  age  and  year  of  issue  the  number  of 
members,  the  amount  of  insurance,  the  total  credits  and  the  total  reserves,  and  that 
there  shall  be  appended  to  said  table  the  following: 

"The  total  credits  for  all  certificates  outstanding  upon  this  plan  as  above  are 
$ ,  and  adjusted  to  December  31,  19 ,  such  credits  are  $ —  — . 

"The  total  required  reserves  for  all  certificates  outstanding  upon  this  plan  as  above 
are  $ ,  and  adjusted  to  December  31,  19 ,  such  reserves  are  $ —  — . 

It  appears  that  Section  23b  offers  a  fairly  satisfactory  solution  of  the  problem 
as  to  the  best  method  of  dealing  with — 

1.  The   membership  of  a   society  in   oppostion   to  the   acceptance   of  theoretically 
adequate  contribution  rates,  provided  existing  rates  are  not  too  low. 

2.  The  membership  of  a  society  on  readjusted  rates  assumed  to  be  adequate  but 
not  equal  to  theoretically  adequate  contributions. 

3.  The  membership  of  a  society  to  which  rates   adequate  only  for   attained   a.^es 
had  been  applied  as  of  original  ages  at  entry,  or  at  younger  than  attained  ages  at 
date  of  rerating. 

4.  The  membership  of  a  society  placed  to  itself  in  a  designated  inadquate  rate  class. 

5.  The  membership  of  a  society  thrown  together  in  one  class,  with  entrants  prior 
to  a  given  date  contributing  at  inadequate  rates,  and  with  entrants  subsequently  to  the 
given  date  contributing  at  adequate  rates. 

Generally  speaking,  these  five  groups  will  cover  the  character  of  business  to  which 
Section  23b  is  applicable — and  then  only  when  all  new  members,  admitted  after  the 
date  of  its  application,  are  placed  upon  theoretically  adequate  contribution  rates  with 
required  reserve  accumulation  set  aside  to  maintain  their  adequacy. 

The  one  exception  to  this  requirement  might  be  in  the  second  case  of  a  read- 
justment upon  rates  assumed  adequate  by  officials  or  members,  but  lower  than  the 
theoretically  adequate  rates,  and  where  it  is  desired  that  a  test  be  made  in  practical 
and  continued  operation  as  to  the  adequacy  of  the  assumption.  Even  in  this  instance, 
it  would  be  much  better,  for  all  concerned,  present  and  future  members  alike,  to 
have  the  new  entrants  contribute  at  theoretically  adequate  rates.  The  latter  never 
yet  have  failed  to  produce  income  sufficient  to  provide  for  promised  benefits  (assum- 
ing wise  and  honest  management),  while  estimated  adequacy  time  and  again  has 
miscarried. 

This  opinion  of  the  remedy  offered  by  Commissioner  Ekern  was  submitted  to  a 
man  who  is  recognized  as  one  that  can  speak  with  authority  on  such  matters,  and 
he  writes  to  me  as  follows : 

"A  second  matter  that  you  have  referred  to  in  no  uncertain  terms,  but  which 
I  should  be  glad  to  see  with  even  a  little  more  emphasis,  is  that  23b  is  absolutely 
useless  to  a  society,  unless  it  puts  its  new  business  on  adequate  tabular  rates.  In  fact, 
to  my  mind,  a  second  condition  of  an  institution  which  adopts  the  concessions  of  23!) 
and  does  not  accompany  it  with  adequate  tabular  rates  as  far  as  new  business  is  con- 
cerned is  worse  than  the  first;  for  in  the  first  place  it  might  be  innocently  guilty  of 
the  deception  of  the  public  implied  in  its  operation.  In  the  second  place,  it  is  enter- 


299 

ing  willfully  upon  a  course  of  deceit.  I  have  been  much  disappointed  that  Mr.  Ekern 
has  not  been  prepared  to  adopt  this  view,  but  with  all  the  respect  I  have  for  him,  I 
cannot  feel  that  he  is  right  in  counseling  that  the  issue  be  not  raised  at  this  time. 
It  seems  to  me  that  now  is  the  time  that  no  society  ought  to  be  allowed  to  put 
in  force  the  methods  of  2$b  under  the  assumption  that  through  the  remedy  it  pre- 
scribes it  may  still  continue  safely  to  write  new  members  under  old  conditions,  with 
the  expectation  of  applying  the  remedy  to  them  when  the  time  comes.  Aside  from 
this,  such  a  course  is  needless,  because  if  a  society  desires  to  write  purely  current 
cost  business,  it  can  do  so  under  the  law  on  the  step-rate  plan,  and  have  the  con- 
sciousness that  it  is  doing  what  it  is  doing  honestly." 

Commissioner  Ekern  declares  that  a  valuation  under  Section  2$b  has  the  striking 
advantage  over  other  methods  in  that  the  results  of  a  valuation  as  provided  in  the 
section  will  show  100  per  cent  or  more  of  solvency — and  cannot  disclose  any  technical 
deficiency,  because  of  offsetting  charges  and  the  required  increase  of  contribution  or 
other  recourse  to  provide  for  the  member's  share  of  losses  in  excess  of  his  credit  and 
current  net  contribution.  To  render  this  statement  altogether  correct  demands  a 
construction  that  will  change  certificates  to  yearly  renewable  contracts  promising  death 
benefit  only,  or  a  construction  of  the  provisions  of  the  section  which  will  explain  the 
procedure  in  the  determination  of  ''cost  of  insurance"  and  the  "charge"  to  be  entered 
where  a  member  is  within  one  or  more  years  of  maturing  a  promised  endowment  or 
other  benefit  of  a  character  as  hereinafter  suggested. 

It  is  my  opinion  that  Commissioners  have  the  authority,  under  discretionary 
powers,  to  prescribe  the  methods  of  procedure  in  the  valuation  of  other  than  death 
benefits.  As  the  section  stands  it  is  not  applicable  to  such  cases,  and  I  agree  with 
as  Actuary  who  has  expressed  himself  on  this  point  to  the  effect  that  "the  added  cost 
involved  by  these  extra  benefits  must  be  provided  for  by  accumulation  functions  deter- 
mined actuarily."  Valuation  by  the  employment  of  such  factors  could  be  accepted 
by  Commissioners  through  a  proper  exercise  of  discretionary  powers. 

In  effect,  this  has  been  done  by  the  Commissioners  in  their  action  at  the  recent 
conference,  December  12,  1913. 

Very  many  societies  promise  to  pay  the  face  of  certificates  by  installments  in  the 
event  of  permanent  total  disability,  or  on  attaining  to  70  years  of  age.  Upon  the 
date  of  any  valuation  there  will  be  matured  obligations  under  both  of  these  promises, 
and  there  will  be  members  in  such  physical  condition  or  so  near  the  endowment 
age  that  claims  will  mature  shortly,  and  on  all  such  certificates  the  insurance  liability 
is  greater  than  where  the  promise  is  for  death  benefit  only. 

Unless  the  courts  decide  against  the  segregation  of  funds  under  the  provisions 
of  Section  2^b,  valuation  under  it  can  be  made  to  serve  the  purpose  hereinbefore 
indicated. 

The  method  of  valuation  best  suited  for  the  individual  society  can  be  determined 
only  by  knowing  the  individual  condition. 

Section  23a  of  the  "Mobile  and  of  the  New  York  Conference  Bills"  provides  for 
the  valuation  of  "Promised  Benefits"  and  of  "Future  Net  Contributions  as  in  practice 
actually  collected,"  and  provides  also  for  an  exhibit  merely  of  the  "Net  Value  of 
Certificates." 

Section  23b  of  the  New  York  Conference  Bill  provides:  "In  lieu  of  the  require- 
ments of  Sections  23  and  233  any  society,  accepting  in  its  laws  the  provisions  of  this 
section,  may  value  its  certificates  on  a  basis,  herein  designated  Accumulation  Basis, 
by  crediting  each  member  with  the  net  amount  contributed  for  each  year  and  with 
interest  at  approximately  the  net  rate  earned,  and  by  charging  him  with  his  share 


300 

of  the  losses  for  each  year,  herein  designated  Cost  of  Insurance,  and  carrying  the 
balance,  if  any,  to  his  credit." 

The  section  further  provides:  "Certificates  issued,  rerated  or  readjusted  on  a 
basis  providing  for  adequate  rates,  with  adequate  reserves  to  mature  such  certificates 
upon  assumptions  for  mortality  and  interest  recognized  by  the  laws  of  this  State, 
shall  be  valued  on  such  basis,  herein  designated  Tabular  Basis." 

In  order  to  take  advantage  of  the  "Accumulation  Basis"  of  valuation  each  society 
must  "accept  the  provisions  in  its  laws."  This  is  a  condition  precedent  and  must 
be  complied  with  prior  to  making  the  valuation. 

It  is  understood  that  some,  and  probably  all,  of  the  Commissioners  of  the  eleven 
States  in  which  the  "Mobile  Bill"  is  effective  will  accept  valuations  made  on  the 
"Accumulation  Basis,"  although  there  is  no  specific  provision  for  it  in  that  bill.  This 
acceptance  is  permissible  under  the  general  discretionary  power  given  to  the  Com- 
missioners. 

By  whatever  method  the  valuation  is  made,  a  society  may  employ  a  Table  of  Mor- 
tality based  upon  its  own  experience  "of  at  least  twenty  years  and  covering  not  less 
than  one  hundred  thousand  lives,  with  interest  assumption  not  more  than  4  per  centum 
per  annum." 

A  question  has  been  raised  as  to  the  intent  of  the  quoted  words  in  reference  to 
"one  hundred  thousand  lives."  The  original  wording  in  the  amendment  offered  by 
the  Royal  Arcanum  in  the  National  Fraternal  Congress  was  "one  hundred  thousand 
members."  I  pointed  out  to  the  representative  of  that  society  that  such  wording 
would  operate  to  exclude  the  Royal  Arcanum  from  the  benefit  of  the  proposed  amend- 
ment to  Section  23  of  the  tentative  bill  then  under  consideration.  I  suggested  as 
a  substitute  for  "members"  the  words  "lives  exposed  to  risk."  The  learned  attorneys 
who  had  charge  of  the  bill  adopted  the  suggestion  by  substituting  "lives"  for  "mem- 
bers," but  omitted  the  words  "exposed  to  risk,"  which  would  have  made  clear  the 
intent  of  Brother  Wiggins  in  offering  the  original  amendment.  However,  the  use 
of  the  word  "lives"  instead  of  "members,"  and  the  unquestioned  purpose  of  the 
provision,  leaves  no  doubt  that  the  meaning  of  the  provision  is  that  any  society  can 
employ  a  Table  of  Mortality  based  upon  its  own  Experience,  when  that  experience 
covers  a  period  of  at  least  twenty  years  and  includes  a  total  of  not  less  than  one  hun- 
dred thousand  lives  exposed  to  risk  during  that  period. 

MATERNITY  BENEFITS. 

Only  one  American  Society  has  established  a  scale  of  contributions  for  maternity 
Benefits. 

It  is  very  common  in  Europe  for  societies  to  pay  a  stipulated  benefit  on  the  birth 
of  a  child. 

Concerning  this  benefit  Mr.  Alfred  W.  Watson  writes : 

Amongst  the  minor  allowances  of  friendly  societies,  maternity  benefits  have  almost 
always  been  found  in  village  friendly  societies  of  women,  and  these  benefits  have  re- 
cently come  more  frequently  under  notice  because  of  the  establishment  of  branches 
of  women  members  of  affiliated  orders -during  the  last  twenty  years.  There  has  been 
a  considerable  misunderstanding  of  the  financial  incidence  of  this  particular  benefit 
in  the  establishment  of  the  branches  of  some  of  the  affiliated  orders.  An  attempt 
has  been  made  to  set  up  separate  funds  for  maternity  benefits  on  the  theory  that,  if 
separate  funds  for  sickness  and  death  benefits  were  required  (this  necessity  was  as- 
sured on  grounds  which  I  have  explained  previously),  a  separate  fund  for  the  ma- 
ternity benefit  was  also  needed.  But,  of  course,  the  societies  which  attempted  to  set 
up  such  funds  failed  to  observe  that  while  benefits  depending  on  sickness  and  mortality 
were  increasing  risks  provided  for  by  a  level  premium,  maternity  benefit  repre- 


301 

sented  a  decreasing  risk  with  the  like  form  of  premium,  and  that  consequently,  the 
reserves,  after  about  30  years  of  age,  must  be  negative.  Several  societies  have  tried 
to  set  up  such  a  fund,  and  naturally,  have  found  it  nearly  always  in  a  state  of  in- 
solvency. I  do  not  suppose  that  any  qualified  adviser  would  undertake  to  quote  a  pre- 
mium for  maternity  benefit  to  be  paid  into  a  separate  fund  for  that  benefit;  but  the 
point  is  worth  mentioning,  if  only  to  indicate  the  problems  which  are  submitted  to  the 
actuary,  with  excellent  intentions,  by  friendly  society  managers  who,  of  necessity,  are 
imperfectly  versed  in  the  technical  principles  involved.  The  same  may  be  said  of  the 
request  occasionally  advanced,  that  the  actuary  will  quote  a  premium  payable  through- 
out life  for  an  optional  maternity  benefit;  this,  obviously,  is  an  impossible  form  of 
contract. 

The  maternity  benefit  is  very  easily  valued  as  a  variable  annuity,  ceasing  at  about 
4.5  years  of  age  in  the  case  of  societies  of  women,  but  assuming  it  to  run  on  to  age  55, 
or  later,  in  the  case  of  societies  of  men.  The  only  collected  experience  in  this  country 
of  maternity  benefit  claims  is  that  of  the  Heart  of  Oaks  Society,  three  recent  years' 
experience  of  which  I  was  enabled  to  obtain  and  analyze  some  time  ago.  I  am  in- 
clined to  think  that  the  birth  rate  of  the  country  generally  is  rather  higher  than  it  is 
among  the  members  of  the  Hearts  of  Oak  Society,  but  having  in  view  the  constant 
decrease  in  this  rate,  it  is  scarcely  safe  to  put  forward  any  positive  opinion. 

On  the  point  last  mentioned  it  is,  perhaps,  worth  referring  to  the  fact  that  I  have 
recently  had  under  examination  a  fairly  large  experience,  obtained  from  a  centralized 
society's  records  referring  to  the  years  1876  to  1880,  and  tabulated  by  Mr.  R.  P.  Hardy. 
This  society  showed  at  the  age  of  27,  which  is  a  typical  age  for  this  purpose,  a  birth 
rate  of  30  per  cent;  that  is  to  say,  30  per  cent  of  the  entire  membership  at  age  27 
had  children  born  to  them  within  a  year.  In  the  Hearts  of  Oak  experience,  in  the 
three  years  1907  to  1909,  the  corresponding  proportion  was  only  17  per  cent.  The 
society  giving  the  1876-80  experience  has  been  recently  through  my  hands,  and  I  found 
its  experience  to  be  about  one-third  higher  than  the  Hearts  of  Oak,  which  would 
make  the  present  birth  rate  in  respect  of  its  members  about  23  per  cent  at  the  age 
of  27.  So  far,  therefore,  as  somewhat  inperfect  statistics!  show,  it  would  seem  that 
in  the  case  of  that  society  the  birth  rate  has  fallen  during  the  last  30  years  by  about 
25  per  cent. 

BENEFIT  FOR  MEMBER'S  WIFE. 

Quoting  further  from  Mr.  Watson : 

There  appears  to  be  scope  for  consideration  with  regard  to  the  method  employed  to 
value  the  benefit  payable  on  the  death  of  a  member's  wife  during  his  lifetime.  Hitherto 
it  has  been  the  orthodox  custom  to  value  this  benefit  by  the  ordinary  function  A*y 
the  female  life  (x)  being  generally  taken  as  two  to  five  years  younger  than  the  male 
life  (y).  The  employment  of  this  function  somewhat  overestimates  the  claims,  in 
consequence  of  ignoring  the  unmarried  condition  of  a  substantial  proportion  of  the 
membership,  and  assuming  that  on  the  valuation  date  the  society  is  on  the  risk  for 
everybody  except  widowers.  The  opposite  and  extremely  unreasonable  course  has 
been  taken  by  many  "valuers"  of  assuming  that  the  men  who  on  the  valuation  date 
were  not  married,  never  would  be  married,  and,  consequently,  of  debiting  the  society 
with  no  liability  in  respect  of  the  wife's  death  benefit  for  these  members.  I  think  a 
middle  course  might  be  found,  and  the  claims  in  respect  of  the  wives  recorded  at  each 
age  of  the  member,  in  order  that  a  rate  of  claim  in  respect  of  wife's  death  might  be 
obtained  (precisely  as  one  would  get  out  the  rate  of  claim  in  respect  of  maternity  or 
sickness)  and  the  benefit  be  valued  on  that  basis.  To  test  the  possibility  of  adopting 
this  course  I  have  analyzed  the  Hearts  of  Oak  experience  for  the  three  years  1907  to 
1909,  and  have  found  that  the  claims  for  wife's  death  benefit  per  thousand  members 
at  risk  emerge  on  something  like  the  following  scale :  2  at  age  26 ;  3  at  age  30 ;  5  at 
age  40;  8  at  age  50;  14  at  age  60,  and  25  at  age  70.  This  gives  a  very  good  series, 
and  naturally  produces  a  value  substantially  lower  than  the  text-book  factor  for  the 
benefit.  After  full  consideration,  I  am  of  opinion  that  this  method  would  supply  a 
legitimate  way  of  valuing  this  particular  benefit  in  a  well  established  society.  It  is 
clear,  however,  that  in  the  case  of  any  recently  established  society,  the  society's  own 
experience  should  not  be  used,  because,  in  such  cases,  there  is  a  tendency  to  recruit 
the  membership  from  amongst  young  and  unmarried  men ;  but  on  the  principle  the 
pla.n  seems  sound. 


302 

LAPSE  ELEMENT  IN  VALUATION. 

Mr.  Alfred  W.  Watson,  an  authority  on  Friendly  Societies,  makes  the  following 
comment  on  the  consideration  of  the  lapse  element  in  the  valuation.  His  statements 
are  applicable  to  the  valuations  of  the  certificates  of  Fraternal  Beneficiary  Societies. 
Only  the  .actuary  of  a  Canadian  Order  has  undertaken  to  introduce  the  lapse  element 
into  the  valuation  of  American  Societies. 

On  general  principles  it  is  a  custom — and  a  sound  one — to  deprecate  any  use  of  the 
secession  element  in  valuing  friendy  societies.  Personally,  I  would  say  nothing  to 
weaken  the  general  opinion  on  this  point.  My  observations  now  are  simply  directed 
to  matters  that  should  be  taken  into  consideration  before,  and  in  case  the  actuary  does 
decide  to  employ  the  secession  element  in  a  particular  valuation.  Broadly,  I  would 
lay  down  the  rule  that  in  small  societies  the  probability  of  secession  should  be  ignored ; 
in  large  societies  there  is  more  ground  for  its  recognition.  But  while  I  would  admit 
in  the  case  of  a  large  society,  the  use  of  the  secession  rate,  as  giving  some  abatement 
of  liabilities  in  a  case  where  there  is  reason  to  expect  a  deficiency,  and  where  the  basis 
in  other  respects  is  adequate,  I  think  it  would  be  distinctly  undesirable  to  use  a  rate 
of  secession  in  the  case  of  a  society,  however  large,  where  the  expected  outcome  of 
the  valuation  was  a  distribution  of  surplus.  Not  only  can  it  be  urged  in  such  a  case, 
that  the  use  of  a  secession  rate  represents  a  present  anticipation  of  possible  future 
profit,  but  the  direct  result  of  that  course  of  action  may  be  to  so  enlarge  the  amount 
of  present  surplus  as  to  afford  the  members  strong  inducement  to  remain  in  the  society, 
thus  weakening  one  of  the  pillars  on  which  the  surplus  depends.  In  dealing  with 
societies  of  recognized  soundness,  and  especially  if  there  is  any  question  of  the  appro- 
priation of  the  surplus,  my  own  course  has  always  been  to  disregard  the  secession 
element,  except  in  regard  to  the  large  collecting  societies  which  are  outside  the  scope 
of  our  syllabus. 

The  employment  of  a  secession  rate  for  large  societies  and  its  disregard  in  the 
case  of  small  bodies  appears  to  set  up  a  discrimination  in  favor  of  large  societies,  as 
regards  the  leniency  of  the  test  of  valuation.  Scientifically  this  is  not  difficult  to  de- 
fend if  the  true  ground  for  the  differentiation  be  kept  in  view.  This  is  not  that  seces- 
sions will  be  fewer  relatively  in  the  small  societies  than  they  will  be  in  the  large 
societies,  but  that  the  uncertainty  of  estimating  them  is  greater.  Secession,  being  an 
event  dependent  upon  the  action  of  the  human  will,  is  always  difficult  of  measurement ; 
when  the  actuary  comes  to  deal  with  very  small  bodies,  such  as  village  friendly  societies, 
he  may  say,  with  confidence,  that  if  he  could  take  a  thousand  societies  and  pool  them 
he  would  find  probably  amongst  them  as  he  would  find  in  one  large  society  with  pre- 
cisely the  same  type  of  members.  But  in  the  practical  conditions  each  society  must  be 
regarded  separately,  and  it  is  the  uncertainty  of  the  secession  element  which  debars 
the  actuary  from  giving  effect  to  it  when  appraising  the  position  of  a  small  body. 


GENERAL  COMMENTS. 

Fraternal  beneficiary  societies  reserve  the  right  to  expel  members  for  certain  in- 
fractions of  the  constitution  and  laws,  and  for  certain  offenses  and  crimes.  The  cases 
of  expulsion  are  comparatively  few  and  may  be  ignored  in  forecasting  future  results. 

The  society  is  virtually  in  the  position  of  the  life  company  in  respect  of  voiding 
or  cancelling  its  contract.  It  has  the  right  to  levy  extra  assessments,  but  so  long  as 
the  member  keeps  up  his  contributions  the  society  must  abide  the  contractual  condi- 
tions. 

However,  the  constitution  and  laws  being  part  of  the  contract,  in  very  many  cases, 
it  is  not  an  easy  matter  to  reduce  the  benefits  and  payments  to  a  working  formula. 

The  policy  of  a  life  company  contains  all  of  the  provisions  and  conditions  of  the 
contract,  where  the  application  is  incorporated  in  the  policy,  as  is  done  almost  uni- 
versally. 

One  must  read  the  entire  constitution  and  laws  of  the  fraternal  beneficiary  society 
to  be  sure  of  contract  conditions,  and  in  some  instances  he  cannot  then  be  certain  of 


303 

the  "Benefit  Side"  and  "Payment  Side"  of  the  contract.  The  learned  actuaries  who 
have  written  text-books  have  not  evolved  symbols  sufficient  to  express  algebraically 
all  of  the  features  of  either  side  to  the  contract. 

It  has  been  the  practice  of  societies  to  have  paramount  regard  to  safety  of  the 
principal  invested,  and  it  is  difficult  to  impress  officials  with  the  necessity  of  earning 
4  per  cent  or  more  when  they  adopt  contribution  rates  calculated  upon  four  per  cent 
interest  assumption. 

I  have  commented  upon  the  importance  of  the  expense  consideration. 

The  valuation  laws  require  that  the  "net"  contributions  be  valued. 

Some  societies  "load"  the  net  premium,  or  contribution  rate,  to  continue  through 
the  period  of  protection  and  to  replace  by  monthly  payments  an  amount  used  in  the 
first  year  for  expenses. 

This  practice  may  be  considered  in  the  nature  of  preliminary  term  insurance  and 
treated  similarly  in  making  a  valuation. 

Or  the  present  value  of  the  loading  may  be  treated  as  a  single  premium  for  the 
purchase  of  the  cash  sum  for  immediate  use,  and  the  amount  of  this  single  premium 
added  to  the  single  premium  for  the  valuation  of  the  protection.  The  loaded  contribu- 
tion rate  then  may  be  treated  as  the  "net"  rate  of  contribution.  Obviously  the  present 
value  of  the  loading  to  be  added  to  the  insurance  single  premiums  will  decrease  from 
year  to  year,  being  valued  by  the  annuity  at  the  attained  age.  which  is  employed  in  the 
valuation  of  the  contributions. 

If  the  valuation  is  by  "Net  Reserves,"  these  must  be  modified  for  a  valuation  where 
the  net  premium  is  loaded  for  a  flat  amount  for  expenses  in  the  first  year. 

The  valuation  laws  for  fraternal  societies  provide  that  the  protection  for  the  current 
year  need  not  be  valued  where  the  whole  or  any  part  of  the  first  year's  contributions 
are  used  for  expenses. 


304 


TABLE  I. 
NATIONAL  FRATERNAL  CONGRESS  TABLE  OF  MORTALITY. 


X 

Age. 

lx 

Number 
Living. 

dx 

Number 
Dying. 

q* 

Yearly  Proba- 
bility of  Dying. 

1000  qx 
Yearly  Death 
Rate  Per  1,000. 

1000  qx  vx 
Discounted 
Yearly  Rate 
Per  1,000. 

ex 

Expecta- 
tion of  Life. 

Average 
Duration 
of  Life. 

20 

100000 

500 

.0050000 

5.000 

4.808 

45.6 

49.7 

21 

99500 

501 

.0050352 

5.035 

4.841 

44.9 

48.8 

22 

98999 

502 

.0050708 

5.071 

4.876 

44.1 

47.9 

23 

98497 

503 

.0051068 

5.107 

4.911 

43.3 

47.0 

24 

97994 

505 

.0051535 

5.154 

4.956 

42.5 

46.1 

25 

97489 

507 

.0052006 

5.201 

5.001 

41.8 

45.2 

26 

96982 

510 

.0052587 

5.259 

5.057 

41.0 

44.3 

27 

96472 

513 

.0053176 

5.318 

5.113 

40.2 

43.4 

28 

95959 

517 

.0053877' 

5.388 

5.181 

39.4 

42.5 

29 

95442 

522 

.0054693 

5.469 

5.259 

38.6 

41.6 

30 

94920 

527 

.0055520 

5.552 

5.338 

37.8 

40.7 

31 

94393 

533 

.0056466 

5.647 

5.430 

37.0 

39.8 

32 

93860 

540 

.0057532 

5.753 

5.532 

36.2 

38.9 

33 

93320 

548 

.0058723 

5.872 

5.646 

35.4 

38.0 

34 

92772 

557 

.0060040 

6.004 

5.773 

34.6 

37.1 

35 

92215 

567 

.0061487 

6.149 

5.912 

33.9 

36.2 

36 

91648 

578 

.0063067 

6.307 

6.064 

33.1 

35.3 

37 

91070 

591 

.0064895 

6.490 

6.240 

32.3 

34.4 

38 

90479 

606 

.0066977 

6.698 

6.440 

31.5 

33.5 

39 

89873 

622 

.0069209 

6.921 

6.655 

30.7 

32.6 

40 

89251 

640 

.0071708 

7.171 

6.895 

29.9 

31.7 

41 

88611 

660 

.0074483 

7.448 

7.162 

29.1 

30.9 

42 

87951 

683 

.0077657 

7.766 

7.467 

28.3 

30.0 

43 

87268 

708 

.0081129 

8.113 

7.801 

27.5 

29.1 

44 

86560 

734 

.0084797 

8.480 

8.154 

26.8 

28.2 

45 

85826 

761 

.0088668 

8.867 

8.526 

26.0 

27.4 

46 

85065 

790 

.0092870 

9.287 

8.930 

25.2 

26.5 

47 

84275 

822 

.0097538 

9.754 

9.379 

24.4 

25.6 

48 

83453 

857 

.0102693 

10.269 

9.874 

23.7 

24.8 

49 

82596 

894 

.0108238 

10.824 

10.408 

22.9 

23.9 

50 

81702 

935 

.0114440 

11.444 

11.004 

22.2 

23.1 

51 

80767 

981 

.0121460 

12.146 

11.679 

21.4 

22.2 

52 

79786 

1029 

.0128970 

12.897 

12.401 

20.7 

21.4 

53 

78757 

1083 

.0137512 

13.751 

13.222 

19.9 

20.6 

54 

77674 

1140 

.0146767 

14.677 

14.112 

19.2 

19.8 

55 

76534 

1202 

.0157054 

15.705 

15.101 

18.5 

19.0 

56 

75332 

1270 

.0168587 

16.859 

16.211 

17.8 

18.2 

57 

74062 

1342 

.0181200 

18.120 

17.423 

17.1 

17.4 

58 

72720 

1418 

.0194994 

19.499 

18.749 

16.4 

16.6 

59 

71302 

1501 

.0210513 

21.051 

20.241 

15.7 

15.8 

60 

69801 

1588 

.0227504 

22.750 

21.875 

15.0 

15.1 

61 

68213 

1681 

.0246434 

24.643 

23.695 

14  A 

14.4 

62 

66532 

1778 

.0267240 

26.724 

25.696 

13.7 

13.6 

63 

64754 

1880 

.0290330 

29.033 

27.916 

13.1 

12.9 

64 

62874 

1985 

.0315711 

31.571 

30.357 

12.4 

12.2 

65 

60889 

2094 

.0343904 

34.390 

33.067 

11.8 

11.6 

305 


TABLE  I. 
NATIONAL  FRATERNAL  CONGRESS  TABLE  OF  MORTALITY— Continued. 


X 

Age. 

lx 

Number 
Living. 

dx 

Number 
Dying. 

Qx 

Yearly  Proba- 
bility of  Dying. 

1000  qx 

Yearly  Death 
Rate  Per  1,000. 

1000qxvx 

Discounted 
Yearly  Rate 
Per  1,000. 

Cx 

Expecta- 
tion of  Life. 

Average 
Duration 
of  Life. 

66 

58795 

2206 

.0375202 

37.520 

36.077 

11.2 

10.9 

67 

56589 

2318 

.0409620 

40.962 

39.387 

10.7 

10.3 

68 

54271 

2430 

.0447753 

44.775 

43.053 

10.1 

9.7 

69 

51841 

2539 

.0489767 

48.977 

47.093 

9.5 

9.1 

70 

49302 

2645 

.0536489 

53.649 

51.586 

9.0 

8.5 

71 

46657 

2744 

.0588122 

58.812 

56.550 

8.5 

7.9 

72 

43913 

2832 

.0644912 

64.491 

62.011 

8.0 

7.4 

73 

41081 

2909 

.0708113 

70.811 

68.087 

7.5 

6.9 

74 

38172 

2969 

.0777795 

77.780 

74.788 

7.0 

6.4 

75 

35203 

3009 

.0854757 

85.476 

82.188 

6.6 

6.0 

76 

32194 

3026 

.0939927 

93.993 

90.377 

6.2 

5.5 

77 

29168 

3016 

.1034010 

103.401 

99.424 

5.7 

5.1 

78 

26152 

2977 

.1138345 

113.835 

109.457 

5.3 

4.7 

79 

23175 

2905 

.  1253506 

125.351 

120.530 

5.0 

4.3 

80 

20270 

2799 

.1380858 

138.086 

132.775 

4.6 

4.0 

81 

17471 

2659 

.1521951 

152.195 

146.341 

4.3 

3.6 

82 

14812 

2485 

.  1677694 

167.769 

161.316 

3.9 

3.3 

83 

12327 

2280 

.1849599 

184.960 

177.846 

3.6 

3.0 

84 

10047 

2050 

.2040410 

204.041 

196.193 

3.3 

2.8 

85 

7997 

1800 

.2250844     • 

225.084 

216.427 

3.0 

2.5 

86 

6197 

1539 

.2483460 

248.346 

238.794 

2.8 

2.3 

87 

4658 

1277 

.2741520 

274.152 

263.608 

2.5 

2.0 

88 

3381 

1023 

.3025732 

302.573 

290.935 

2.3 

.8 

89 

2358 

788 

.3341815 

334.182 

321.329 

2.1 

.7 

90 

1570 

579 

.3687898 

368.790 

354.606 

1.9 

.5 

91 

991 

404 

.4076690 

407.669 

391.989 

1.7 

.4 

92 

587 

264 

.4497445 

449.745 

432.447 

1.5 

.2 

93 

323 

161 

.4984520 

498  .  452 

479.281 

1.4 

.0 

94 

162 

89 

.5493827 

549.383 

528.253 

1.2 

.9 

95 

73 

44 

.6027397 

602.740 

579.557 

1.1 

.8 

96 

29 

19 

.6551724 

655.172 

629.973 

1.0 

.8 

97 

10 

7 

.7000000 

700.000 

673.077' 

.8 

.7 

98 

3 

3 

1.0000000 

1000.000 

961.538 

.5 

.5 

306 


TABLE  II. 

FRATERNAL  EXPERIENCE— FOUR  PER  CENT. 
Commutation  Columns. 


X 

vx 

Dx  =  lxv* 

NX  =  SDX 

SX  =  SNX 

Cx— 

dxv*+1 

MX=SCX 

RX  =  ZM, 

20 
21 
22 
23 
24 

0.456387 
.438834 
.421955 
.405726 
.390121 

45638.694620 
43663.943411 
41773.161323 
39962.826653 
38229.563757 

935208.44679 
889569.75217 
845905.80876 
804132.64744 
764169.82079 

16198892.4659 
15263684.0191 
14374114.2669 
13528208.4581 
12724075.8107 

219.416801 
211.399649 
203.674619 
196.231102 
189.433985 

9669.13897 
9449.72217 
9238.32252 
9034.64791 
8838.41680 

312174.1212 
302504.9822 
293055.2600 
283816.9375 
274782.2896 

25 
26 
27 
28 
29 

.375117 
.360689 
.346817 
.333477 
.320651 

36569.761935 
34980.363189 
33458.088154 
32000.164667 
30603.612321 

725940.25703 
689370.49509 
654390.13190 
620932.04375 
588931.87908 

11959905.9899 
11233965.7329 
10544595.2578 
9890205.1059 
9269273.0621 

182.869441 
176.876451 
171.073943 
165.776781 
160.942345 

8648.98282 
8466.11338 
8289.23693 
8118.16298 
7952.38620 

265943.8728 
257294.8900 
248828.7766 
240539.5397 
232421.3767 

30 
31 
32 
33 
34 

.308319 
.296460 
.285058 
.274094 
.263552 

29265.607964 
27983.773102 
26755.538255 
25578.468237 
24450.254452 

558328.26676 
529062.65880 
501078.88570 
474323.34744 
448744.87920 

8680341  .  1830 
8122012.9163 
7592950.2575 
7091871.3718 
6617548.0243 

156.234556 
151.935882 
148.010854 
144.426545 
141.152417 

7791.44386 
7635.20930 
7483.27342 
7335.26257 
7190.83602 

224468.9905 
216677.5466 
209042.3373 
201559.0639 
194223.8031 

35 
36 
37 
38 
39 

.253415 
.243669 
.234297 
.225285 
.216621 

23368.707633 
22331.751021 
2133Z.  413942 
20383.600485 
19468.343764 

424294.62475 
400925.91712 
378594.16610 
357256.75216 
336873.15167 

6168803.1451 
5744508.5204 
5343582.6033 
4964988.4373 
4607731.6850 

138.160165 
135.423578 
133  .  143690 
131.2720SS 
129.555786 

7049.68360 
6911.52344 
6776.09986 
6642.95617 
6511.68408 

187032.9653 
179983.2817 
173071.7583 
166295.6584 
159652.7022 

40 
41 
42 
43 
44 

.208289 
.200278 
.  192575 
.185168 
.  178046 

18590.005525 
17746.827439 
16937.157699 
16159.258675 
15411.691911 

317404.80791 
298814.80238 
281067.97494 
264130.81724 
247971.55857 

4270858.5333 
3953453.7254 
3654638.9231 
3373570.9481 
3109440.1309 

128.177874 
127.099454 
126.409SS2 
126.056815 
125.659634 

6382.12830 
6253.95042 
6126.85097 
6000.38109 
5874.32427 

153141.0182 
146758.8899 
140504.9394 
134378.0885 
128377.7074 

45 
46 
47 
48 
49 

.171198 
.  164614 
.  158283 
.152195 
.  146341 

14693.274895 
14002.877792 
13339.262351 
12701  .  109702 
12087.191143 

232559.86666 
217866.59176 
203863.71397 
190524.45162 
177823.34192 

2861468.5723 
2628908.7056 
2411042.1139 
2207178.3999 
2016653.9483 

125.271146 
125.043219 
125.104097 
125.414340 
125.797078 

5748.66464 
5623.39349 
5498.35028 
5373.24618 
5247.83184 

122503.3831 
116754.7185 
111131.3250 
105632.9747 
100259.7285 

50 
51 
52 
53 
54 

.140713 
.135301 
.130097 
.  125093 
.120282 

11496.502098 
10927.822887 
10379.897122 
9851.949610 
9342.763354 

165736.15078 
154239.64868 
143311.82579 
132931.92867 
123079.97906 

1838830.6064 
1673094.4556 
1518854.8069 
1375542.9811 
1242611.0525 

126.506053 
127.624885 
128.720700 
130.265117 
131.847285 

5122.03476 
4995.52871 
4867.90382 
4739.18312 
4608.91801 

95011.8967 
89889.8619 
84894.3332 
80026.4294 
75287.2463 

55 

56 
57 
58 
59 

.115656 
.111207 
.106930 
.102817 
.098863 

8851.579017 
8377.462587 
7919.451359 
7476.876219 
7049.116582 

113737.21570 
104885.63669 
96508.17410 
88588.72274 
81111.84652 

1119531.0734 
1005793.8577 
900908.2210 
804400.0469 
715811.3242 

133.671083 
135.801129 
137.980857 
140.187475 
142.685662 

4477.07072 
4343.39964 
4207.59851 
4069.61765 
3929.43018 

70678.3283 
66201.2575 
61857.8579 
57650.2594 
53580.6417 

60 
61 
62 
63 
64 

.095060 
.091404 
.087889 
.084508 
.081258 

6635.311052 
6234.956860 
5847.409949 
5472.253719 
5109.017328 

74062.72994 
67427.41889 
61192.46203 
55345.05208 
49872.79836 

634699.4776 
560636.7477 
493209.3288 
432016.8668 
376671.8147 

145.149920 
147.740878 
150.255847 
152.765095 
155.093450 

3786.74452 
3641.59460 
3493.85372 
3343.59787 
3190.83278 

49651.2116 
45864.4671 
42222.8725 
38729.0187 
35385.4209 

65 

.078133 

4757.423211 

44763.78103 

326799.0163 

157.317227 

3035.73933 

32194.5881 

307 


TABLE  II. 

FRATERNAL  EXPERIENCE— FOUR  PER  CENT— Continued. 
Commutation  Columns. 


X 

vx 

Dx  =  lxv* 

NX  =  SDX 

SX  =  SNX 

cx= 

C1XV*+1 

MX  =  SCX 

RX  =  SMX 

66 
67 
68 
69 

.075128 
.072238 
.069460 
.066788 

4417.128168 
4087.881392 
3769.647591 
3462.365875 

40006.35782 
35589.22965 
31501.34862 
27731.70067 

282035.2353 
242028.8775 
206439.6478 
174938.2996 

159.357231 
161.007594 
162.295270 
163.053059 

2878.42210 
2719.06487 
2558.05727 
2395.76200 

29158.8488 
26280.4267 
23561.3618 
21003.3045 

70 
71 
72 
73 
74 

.064219 
.061749 
.059374 
.057091 
.054895 

3166.144898 
2881.042869 
2607.310048 
2345.347708 
2095.452434 

24269.33480 
21103.18990 
18222.14703 
15614.83698 
13269.48927 

147206.5989 
122937.2641 
101834.0742 
83611.9272 
67997.0902 

163.327226 
162.923480 
161.681184 
159.689593 
156.714705 

2232.70894 
2069.38172 
1906.45824 
1744.77706 
1585.08746 

18607.5425 
16374.8336 
14305.4519 
12398.9936 
10654.2166 

75 
76 

77 
78 
79 

.052784 
.050754 
.048801 
.046924 
.045120 

1858.143405 
1633.958993 
1423.441179 
1227.169188 
1045.649028 

11174.03684 
9315.89343 
7681.93444 
6258.49326 
5031.32407 

54727.6009 
43553.5641 
34237.6707 
26555.7362 
20297.2430 

152.717358 
147.673238 
141.524253 
134.321344 
126.031467 

1428.37276 
1275.65540 
1127.98216 
986.45791 
852.13656 

9069.1291 
7640.7564 
6365.1010 
5237.1188 
4250.6609 

80 
81 

82 
83 

84 

.043384 
.041716 
.040111 
.038569 
.037085 

879.400291 
728.814963 
594.127809 
475.433998 
372.594038 

3985.67505 
3106.27475 
2377.45979 
1783.33198 
1307.89798 

15265.9189 
11280.2438 
8173.9691 
5796.5093 
4013.1773 

116.762239 
106.655809 
95.842742 
84.554037 
73.100445 

726.10510 
609.34286 
502.68705 
406.84431 
322.29027 

3398.5243 
2672.4192 
2063.0764 
1560.3893 
1153.5450 

85 
86 
87 
88 
89 

.035659 
.034287 
.032969 
.031701 
.030481 

285.163053 
212.478170 
153,567377 
107.179398 
71.874792 

935.30395 
650.14089 
437.66272 
284.09535 
176.91595 

2705.2793 
1769.9754 
1119.8345 
682.1718 
398.0764 

61.717074 
50.738556 
40.481541 
31  .  182321 
23.095410 

249.18982 
187.47275 
136.73419 
96.25265 
65.07033 

831.2547 
582.0649 
394.5922 
257.8580 
161.6053 

90 
91 
92 

93 
94 

.029309 
.028182 
.027098 
.026056 
.025053 

46.014967 
27.927996 
15.906363 
8.415927 
4.058646 

105.04116 
59.02619 
31.09819 
15.19183 
6.77590 

221  .  1605 
116.1193 
57.0931 
25.9949 
10.8031 

16.317164 
10.947480 
6.878653 
4.033592 
2  .  143990 

41.97492 
25.65776 
14,71028 
7.83163 
3.79803 

96.5350 
54.5601 
28.9023 
14.1920 
6.3604 

95 
96 
97 

98 

.024090 
.023163 
.022272 
.021416 

1.758554 
0.671734 
0.222724 
0.064247 

2.71726 
0.95870 
0.28697 
0.06425 

4.0272 
1.3099 
.3512 
.0642 

1.019183 
0.423175 
0.149910 
0.061776 

1.65404 
0.63486 
0.21169 
0.06178 

2.5624 
.9083 
.2735 
.0618 

308 


TABLE  III. 
FRATERNAL  EXPERIENCE— FOUR  PER  GENT. 


X 

a      N* 

A      M* 

p=Mx 

%       o              0 

*"f   11? 

S  '«  H|» 

O    Z             (K 

100  N70 

-   ITO-X^X 

Value  of?  1.00 
tu  Age  70. 

X     Dx 
Life 
Annuity. 

*     Dx 

Whole  Lite 
Sin  ;le 
Premium. 

*     Nx 
Annual 
Premium. 

NX-N70 

Annuity  of  $100, 
beginning  at  70. 

20 

20.491G 

211.863 

10.34 

8.16 

2.66 

19.960 

21 

20.3731 

216.420 

10.62 

8.34 

2.80 

19.817 

22 

20.2500 

221.155 

10.92 

8.53 

2.95 

19.669 

23 

20.1220 

226.077 

11.24 

8.72 

3.11 

19.515 

24 

19.9890 

231.193 

11.57 

8.93 

3.28 

19.354 

25 

19.8508 

236.507 

11.91 

9.14 

3.46 

19.187 

26 

19.7074 

242.025 

12.28 

9.37 

3.65 

19.014 

27 

19.5585 

247.750 

12.67 

9.61 

3.85 

18.833 

28 

19.4040 

253.691 

13.07 

9.86 

4.07 

18.646 

29 

19.2439 

259.851 

13.50 

10.13 

4.30 

18.451 

30 

19.0780 

266.232 

13.96 

10.41 

4.54 

18.249 

31 

18.9060 

272.844 

14.43 

10.70 

4.81 

18.039 

32 

18.7280 

279.691 

14.93 

11.01 

5.09 

17.821 

33 

18.5439 

286.775 

15.47 

11.34 

5.39 

17.595 

34 

18.3534 

294.101 

16.02 

11.68 

5.71 

17.361 

35 

18.1565 

301.672 

16.62 

12.04 

6.07 

17.118 

36 

17.9532 

309.493 

17.24 

12.42 

6.44 

16.866 

37 

17.7482 

317.569 

17.90 

12.82 

6.85 

16.606 

38 

17.5267 

325.897 

18.59 

13.24 

7.29 

16.336 

39 

17.3036 

334.476 

19.33 

13.69 

7.76 

16.057 

40 

17.0740 

343.310 

20.11 

14.16 

8.28 

15.768 

41 

16.8376 

352.398 

20.93 

14.65 

8.84 

15.470 

42 

16.5948 

361.740 

21.80 

15.16 

9.45 

15.162 

43 

16.3455 

371.328 

22.72 

15.71 

10.12 

14.844 

44 

16.0898 

381.160 

23.69 

16.28 

10.85 

14.515 

45 

15.8276 

391.245 

24.72 

16.88 

11.65 

14.176 

46 

15.5587 

401.588 

25.81 

17.51 

12.54 

13.826 

47 

15.2830 

412.193 

26.97 

18.18 

13.51 

13.464 

48 

15.0006 

423.053 

28.20 

18.89 

14.60 

13.090 

49 

14.7117 

434.165 

29.51 

19.64 

15.81 

12.704 

50 

14.4162 

445.530 

30.91 

20.42 

17.16 

12.305 

51 

14.1144 

457.138 

32.39 

21.26 

18.67 

11.893 

52 

13.8067 

468.974 

33.97 

22.14 

20.39 

11.469 

53 

13.4930 

481.040 

35.65 

23.07 

22.33 

11.030 

54 

13.1738 

493.314 

37.45 

24.05 

24.56 

10.576  ' 

55 

12.8494 

505.793 

39.36 

25.09 

27.13 

10.108 

56 

12.5200 

518.462 

41.41 

26.18 

9.623 

57 

12  .  1862 

531.299 

43.60 

27.34 

9.122 

58 

11.8484 

544.294 

45.94 

28.56 

8.602 

59 

11.5067. 

557.436 

48.45 

29.85 

8.064 

60 

11.1619 

570.696 

51.13 

31.21 

7.504 

61 

10.8144 

584.061 

54.01 

32.64 

6.922 

62 

10.4649 

597.505 

57.10 

34.16 

6.315 

63 

10.1138 

611.009 

.       60.41 

35.75 

5.679 

64 

9.7617 

624.549 

63.98 

37.42 

5.012 

309 


TABLE  III.  . 
FRATERNAL  EXPERIENCE— FOUR  PER  CENT— Continued. 


X 

Nx 

ai=D7 

Life 

Annuity. 

A  -Mx 
X~DT 

Whole  Life 
Single 
Premium. 

P  _M« 
Px~N^ 

Annual 
Premium. 

%         0                0 

L'fc    a  eg 

£  L  31$ 

8*     £ 

100  N70 

70-xftx 

Value  of  $1.00 
to  Age  70. 

NX-N70 

Annuity  of  $100, 
beginning  at  70. 

65 

9.4092 

638.106 

67.82 

39.18 

4.308 

66 

9.0571 

651.650 

71.95 

41.03 

3.563 

67 

8.7060 

665.153 

76.40 

42.96 

2.769 

68 

8.3566 

678.593 

81.21 

44.99 

1.919 

69 

8.0095 

691.944 

86.39 

47.09 

1.000 

70 

7.6653 

705.182 

92.00 

71 

7.3248 

718.275 

98.06 

72 

6.9889 

731.197 

104.62 

73 

6.6578 

743.931 

111.74 

74 

6.3325 

756.442 

119.45 

75 

6.0135 

768.710 

127.83 

76 

5.7014 

780.715 

136.93 

77 

5.3967 

792.433 

146.83 

78 

5.0999 

803.848 

157.62 

79 

4.8117 

814.936 

169.37 

80 

4.5323 

825.682 

182.18 

81 

4.2621 

836.074 

196.16 

82 

4.0016 

846.093 

211.44 

83 

3.7510 

855.733 

228.13 

84 

3.5102 

864.990 

246.42 

85 

3.2799 

873.850 

266.43 

86 

3.0598 

882.315 

288.36 

87 

2.8500 

890.386 

312.42 

88 

2.6507 

898.052 

338.80 

89 

2.4614 

905.329 

367.81 

90 

2.2828 

912.202 

399.60 

91 

2.1135 

918.711 

434.69 

92 

1.9551 

924.805 

473.02 

93 

1.8051 

930.572 

515.52 

94 

1.6695 

935.789 

560.51 

95 

1.5452 

940.571 

608.71 

96 

1.4272 

945  .  107 

662.21 

97 

1.2885 

950.444 

737.64 

98 

1.0000 

961.538 

961.54 

TABLE  IV. 
FRATERNAL  EXPERIENCE— FOUR  PER  CENT. 


X 

1000  Mx 

1000  Mx 

Mx  —  Mx  +20 

MX-MX+10 

Mx-Mx+6 

NX-NX+20 

NX-NX+10 

NX-NX+20 

NX-NX+10 

Nx-Nx+5 

Age. 

20  Payment  Life. 

10  Payment  Life. 

20  Year  Term 
Premium. 

10  Year  Term 
Premium. 

5  Year  Term 
Premium. 

20 

15.65 

25.66 

5.32 

4.98 

4.97 

21 

16.00 

26.21 

5.41 

5.03 

5.01 

22 

16.36 

26.79 

5.51 

5.09 

5.06 

23 

16.73 

27.39 

5.62 

5.15 

5.11 

24 

17.12 

28.02 

5.74 

5.22 

5.16 

25 

17.53 

28.67 

5.88 

5.30 

5.22 

26 

17.96 

29.35 

6.03 

5.39 

5.29 

27 

18.40 

30.06 

6.19 

5.49 

5.36 

28 

18.86 

30.79 

6.38 

5.59 

5.45 

29 

19.34 

31.55 

6.58 

5.72 

5.54 

30 

19.85 

32.34 

6.80 

5.85 

5.65 

31 

20.37 

33.16 

7.04 

6.00 

5.76 

32 

20.92 

34.01 

7.31 

6.17 

5.89 

33 

21.49 

34.90 

7.60 

6.35 

6.04 

34 

22.08 

35.82 

7.93 

6.56 

6.20 

35 

22.70 

36.77 

8.28 

6.79 

6.38 

36 

23.35 

37.76 

8.67 

7.04 

6.58 

37 

24.02 

38.78 

9.11 

7.31 

6.80 

38 

24.73 

39.84 

9.58 

7.62 

7.05 

39 

25.46 

40.94 

10.10 

7.95 

7.32 

40 

26.23 

42.08 

10.67 

8.31 

7.63 

41 

27.03 

43.26 

11.29 

8.70 

7.96 

42 

27.87 

44.48 

11.98 

9.14 

8.32 

43 

28.74 

45.74 

12.72 

9.61 

8.71 

44 

29.65 

47.04 

13.55 

10.13 

9.13 

45 

30.61 

48.38 

14.45 

10.70 

9.59 

46 

31.62 

49.77 

15.43 

11.33 

10.09 

47 

32.67 

51.22 

16.52 

12.02 

10.65 

48 

33.79 

52.71 

17.70 

12.79 

11.27 

49 

34.96 

54.26 

19.00 

13.63 

11.95 

50 

36.21 

55.87 

20.42 

14.57 

12.70 

51 

37.52 

57.54 

21.98 

15.60 

13.53 

52 

38.92 

59.28 

23.67 

16.73 

14.46 

53 

40.40 

61.08 

25.52 

17.99 

15.48 

54 

41.97 

62.96 

27.54 

19.37 

16.61 

55 

43.65 

64.91 

29.73 

20.90 

17.86 

56 

45.45 

66.95 

32.10 

22.58 

19.24 

57 

47.37 

69.07 

34.67 

24.43 

20.77 

58 

49.43 

71.29 

37.45 

26.48 

22.46 

59 

51.65 

73.61 

40.45 

28.73 

24.34 

60 

54.04 

76.05 

43.68 

31.21 

26.41 

61 

56.77 

78.61 

47.30 

33.93 

28.71 

62 

59.41 

81.31 

50.86 

36.94 

31.25 

63 

62.43 

84.15 

54.83 

40.24 

34.07 

64 

65.74 

87.17 

59.07 

43.87 

37.19 

65 

69.27 

90.38 

63.59 

47.85 

40.64 

66 

73.26 

93.79 

68.50 

52.22 

42.60 

67 

77.35 

97.43 

73.46 

57.01 

44.64 

68 

81.95 

101.34 

78.86 

62.26 

46.79 

69 

86.96 

105.54 

84.60 

68  00 

49.03 

311 


TABLE  V. 
MODIFIED  COMMUTATION  COLUMNS  FOR  MONTHLY  PREMIUMS. 

National  Fraternal  Congress  Table  of  Mortality  and  4  per  cent  interest. 


Age 

N12 

1NZ 

log.N- 

MJ' 

log.  M^2 

Age 

N» 

log.  N^2 

M- 

log.  Mlx2 

20 

914228 

5.961055 

9846.39 

3.99328 

60 

70996.2 

.851235 

3856.17 

.58616 

21 

8(59496 

.939268 

9622.97 

.98331 

61 

64545.4 

.809865 

3708.36 

.56919 

22 

S26700 

.917348 

9407.69 

.97348 

62 

58489  .  1 

.767075 

3557.91 

.55119 

23 

785758 

.895289 

9200.28 

.96380 

63 

52814.6 

.722754 

3404.90 

.53210 

24 

746591 

.873083 

9000.47 

.95427 

64 

47509.8 

.676783 

3249.33 

.51179 

25 

709123 

.850722 

8807.55 

.94486 

65 

42563.0 

.629032 

3091.40 

.49016 

26 

673283 

.828198 

8621.32 

.93557 

66 

37962.6 

.579356 

2931.20 

.46705 

27 

639002 

.805502 

8441.20 

.92640 

67 

33697.4 

.527596 

2768.91 

.44231 

28 

606213 

.782625 

8266.98 

.91735 

68 

29756.5 

.473582 

2604.96 

.41581 

29 

574854 

.759558 

8098.17 

.90839 

69 

26128.8 

.417120 

2439.69 

.38734 

30 

544865 

.736289 

7934.29 

.89951 

70 

22803.3 

.357998 

2273.64 

.35671 

31 

516188 

.712808 

7775.19 

.89071 

71 

19768.9 

.295982 

2107.32 

.32373 

32 

488768 

.689103 

7620.47 

.88198 

72 

17014.4 

.230817 

1941.41 

.28812 

33 

462553 

.665161 

7469.75 

.87331 

73 

14528.2 

.162212 

1776.77 

.24964 

34 

437493 

.640971 

7322.66 

.86467 

74 

12298.5 

.089852 

1614.15 

.20796 

35 

413539 

.616517 

7178.93 

.85606 

75 

10312.9 

.013381 

1454.56 

.  16273 

36 

390646 

.591783 

7038.24 

.84746 

76 

8558.49 

3.932397 

1299.04 

.11361 

37 

368771 

.566757 

6900.32 

.83887 

77 

7022.00 

.846461 

1148.66 

.06024 

38 

347872 

.541419 

6764.74 

.83025 

78 

5689.46 

.755071 

1004.54 

.00195 

39 

327909 

.515753 

6631.06 

.82159 

79 

4546.38 

.657666 

867.761 

2.93840 

40 

308844 

.489739 

6499  .  14 

.81285 

80 

3577.77 

.553612 

739.416 

.86889 

41 

290641 

.463357 

6368.60 

.80404 

81 

2768  .  17 

.442193 

620.513 

.79275 

42 

273266 

.436586 

6239  .  19 

.79513 

82 

2101.80 

.322591 

511.903 

.70919 

43 

256686 

.409402 

6110.39 

.78607 

83 

1562.71 

.  193878 

414.303 

.61731 

44 

240870 

.381783 

5982.02 

.77685 

84 

1134.98 

.054988 

328.199 

.51614 

45 

225788 

.353701 

5854.06 

.76746 

85 

802.943 

2.904685 

253.758 

.40442 

46 

211412 

.325130 

5726.48 

.75789 

86 

551.505 

.741549 

190.910 

.28083 

47 

197714 

.296037 

5599  .  16 

.74813 

87 

366.366 

.563915 

139.241 

.14377 

48 

184668 

.266392 

5471.76 

.73813 

88 

234.330 

.369828 

98.0174 

1.99130 

49 

172249 

.236157 

5344.04 

.72787 

89 

143.539 

.156971 

66.2633 

.82127 

50 

160433 

.205294 

5215.94 

.71733 

90 

83.671 

1.922575 

42.7445 

.63088 

51 

149198 

.  173763 

5087.11 

.70647 

91 

46.055 

.663277 

26.1282 

.41711 

52 

138522 

.141519 

4957.15 

.69523 

92 

23.710 

.374932 

14.9800 

.17551 

53 

128385 

.108514 

4826.06 

.68360 

93 

11.282 

.052386 

7.9752 

0.90174 

54 

118767 

.074696 

4693.42 

.67149 

94 

4.890 

0.689309 

3.8677 

.58745 

55 

109650 

.040009 

4559.15 

.65889 

95 

1.900 

.278754 

1.6844 

.22645 

56 

101017 

.004394 

4423.03 

.64572 

96 

.646 

1.810233 

.6465 

1.81057 

57 

92S50.3 

4.967783 

4284.75 

.63193 

97 

.184 

.264818 

.2156 

.33365 

58 

85134.6 

.930106 

4144.23 

.61744 

98 

.034 

2.531479 

.0629 

2.79865 

59 

77854.7 

.891285 

4001.47 

.60222 

312 


TABLE  V*. 
ANNUITIES,  SINGLE  PREMIUMS,  AND  ANNUAL  PREMIUMS. 

MOMENTLY  BASIS. 
National  Fraternal  Congress  Table  of  Mortality  and  4  per  cent  interest. 


Age 

Ox 

Ax 

Fx 

Age 

ax 

Ax 

Fx 

20 

19.9879 

216.06 

10.81 

60 

10.6568 

582.03 

54.62 

21 

19.8694 

220.71 

11.11 

61 

10.3091 

595.67 

57.78 

22 

19.7463 

225.54 

11.42 

62 

9.9595 

609.38 

61  .  19 

23 

19.6183 

230.56 

11.75 

63 

9.6082 

623.16 

64.86 

24 

19.4853 

235.77 

12.10 

64 

9.2559 

636.98 

08.82 

25 

19.3471 

241.19 

12.47 

65 

8.9031 

650.81 

73.10 

26 

19.2037 

246.82 

12.85 

66 

8.5508 

664.63 

77.73 

27 

19.0548 

252.66 

13.26 

67 

8.1994 

678.41 

82.74 

28 

18.9003 

258.72 

13.69 

68 

7.8497 

692.13 

88.17 

29 

18.7402 

265.00 

14.14 

69 

7.5022 

705.76 

94.07 

30 

18.5743 

271.50 

14.62 

70 

7.1576 

719.27 

100.49 

31 

18.4023 

278.25 

15.12 

71 

6.8167 

732.64 

107.48 

32 

18.2243 

285.23 

15.65 

72 

6.4803 

745.84 

115.09 

33 

18.0402 

292.45 

16.21 

73 

6.1487 

758.84 

123.41 

34 

17.8496 

299.93 

16.80 

74 

5.8228 

771.63 

132.52 

35 

17.6527 

307.65 

17.43 

75 

5.5031 

784.16 

142.49 

36 

17.4494 

315.62 

18.09 

76 

5  .  1903 

796.43 

153.45 

37 

17.2394 

323.86 

18.79 

77 

4.8848 

808.41 

165.50 

38 

17.0229 

332.35 

19.52 

78 

4.5871 

820.09 

178.78 

39. 

16.7998 

341  .  10 

20.30 

79 

4.2978 

831.44 

193.46 

40 

16.5701 

350.11 

21.13 

80 

4.0173 

842.44 

209.70 

41 

16.3337 

359.38 

22.00 

81 

3.7458 

853.09 

±27.75 

42 

16.0909 

368.90 

22.93 

82 

3.4838 

863.36 

247.82 

43 

15.8416 

378.68 

23.90 

83 

3.2316 

873.25 

270.22 

44 

15.5858 

388.71 

24.94 

84 

2.9889 

882.77 

295.35 

45 

15.3236 

399.00 

26.04 

85 

2.7565 

891.89 

323.56 

46 

15.0547 

409.54 

27.20 

86 

2.5341 

900.61 

47 

14.7789 

420.36 

28.44 

87 

2.3215 

908.95 

48 

14.4965 

431.44 

29.76 

88 

2.1191 

916.89 

49 

14.2076 

442.77 

31.16 

89 

1.9263 

924.45 

50 

13.9120 

454.36 

32.66 

90 

1.7435 

931.62 

51 

13.6101 

466.20 

34.25 

91 

1.5694 

938.45 

52 

13.3024 

478.27 

35.95 

92 

1.4053 

944.  SS 

53 

12.9886 

490.58 

37.77 

93 

1.2485 

951.03 

54 

12.6693 

503.10 

39.71 

94 

1  .  1044 

956.68 

55 

12.3449 

515.82 

41.78 

95 

.9705 

961.94 

56 

12.0154 

528.75 

44.01 

96 

.8413 

967.00 

57 

11.6815 

541.84 

46.38 

97 

.6915 

972.88 

58 

11.3436 

555.10 

48.94 

98 

.3800 

985.10 

59 

11.0017 

568.51 

51.67 

313 


TABLE  VI. 

FRATERNAL  EXPERIENCE— THREE  AND  ONE-HALF  PER  CENT. 
Commutation  Columns. 


X 

Dx  =  lxvx 

NX  =  SDX 

SX  =  SNX 

cx= 

dx  vx+I 

MX  =  2CX 

R*  =  2M, 

20 

50256.6 

1116620 

20395400 

242.786 

12496.5 

426927 

21 

48314.3 

1066360 

19278800 

235.044 

12253.7  . 

414430 

22 

46445.4 

1018050 

18212400 

227.550 

12018.7 

402176 

23 

44647.3 

971606 

17194300 

220.293 

11791.2 

390157 

24 

42917.2 

926959 

16222700 

213.689 

11570.9 

378366 

25 

41252.2 

884042 

15295700 

207.281 

11357.2 

366795 

26 

39649.9 

842790 

14411700 

201.456 

11149.9 

355438 

27 

38107.6 

S03140 

13568900 

195.788 

10948.4 

344288 

28 

36623  .  1 

765032 

12765800 

190.643 

10752.6 

333340 

29 

35194.0 

728409 

12000800 

185.978 

10562.0 

322587 

30 

33818.0 

693215 

11272400 

181.410 

10376.0 

312025 

31 

32492.9 

659397 

10579200 

177.270  ' 

10194.6 

301649 

32 

31216.9 

626904 

9919750 

173.525 

10017.3 

291454 

33 

29987.7 

595687 

9292850 

170.141 

9843.74 

281437 

34 

28803.5 

565699 

8697160 

167.087 

9673.60 

271593 

35 

27662.4 

536895 

8131460 

164.335 

9506.51 

261919 

36 

26562.6 

509233 

7594560 

161.858 

9342  .  18 

252412 

37 

25502.5 

482670 

7085330 

159.902 

9180.32 

243070 

38 

24480.2 

457168 

6602660 

158.416 

9020.42 

233890 

39 

23493.9 

432688 

6145490 

157.100 

8862.00 

224870 

40 

22542  .  3 

409194 

5712800 

156.180 

8704.90 

216008 

41 

21623.9 

380652 

5303610 

155.614 

8548.72 

207303 

42 

20737.0 

36502S 

4916960 

155.591 

8393.11 

198754 

43 

19880.2 

344291 

4551930 

155.833 

8237.51 

190361 

44 

19052.1 

324411 

4207640 

156.092 

8081.69 

182123 

45 

18251.7 

305359 

3883230 

156.361 

7925.60 

174041 

46 

17478.1 

287107 

3577870 

156.831 

7769.24 

166115 

47 

16730.3 

269629 

3290760 

157.665 

7612.41 

158346 

48 

16006.8 

252899 

3021130 

158.820 

7454.74 

150734 

49 

15306.7 

236892 

2768230 

160.074 

7295.92 

143279 

50 

14629.1 

221585 

2531340 

161.754 

7135.85 

135983 

51 

13972.6 

206950 

2309760 

163.972 

6974.10 

128847 

52 

13336.1 

192983 

2102800 

166.179 

6810.13 

121873 

53 

12718.9 

179647 

1909820 

168.985 

6643.95 

115063 

54 

12119.8 

166928 

1730170 

171.864 

6474.96 

108419 

55 

11538.1 

154808 

1563240 

175.083 

6303.10 

101944 

56 

10972.9 

143270 

1408430 

178.733 

6128.02 

95641.2 

57 

10423  .  1 

132297 

1265160 

182.479 

5949.29 

89513.2 

58 

9888.16 

121874 

1132860 

186.292 

5766.81 

83563.9 

59 

9367.46 

111986 

1010990 

190.529 

5580.52 

77797.1 

60 

8860.14 

102619 

899004 

194.755 

5389.99 

72216.6 

61 

8365.79 

93758.5 

796385 

199.190 

5195.23 

66826.6 

62 

7883.69 

85392.7 

702626 

203.559 

4996.04 

61631.4 

63 

7413.54 

77509.0 

617233 

207.958 

4792.48 

56635.4 

64 

6955.89 

70095.5 

539724 

212.148 

4584.52 

51842.9 

314 


TABLE  VI. 

FRATERNAL  EXPERIENCE— THREE  AND  ONE-HALF  PER  CENT— Continued. 

Commutation  Columns. 


X 

Dx=lxv* 

NX  =  SDX 

SX  =  SNX 

cx= 

dxv*+1 

MX  =  SCX 

RX  =  2MX 

65 

6507.54 

63139.6 

469629 

216.229 

4372.37 

47258.4 

66 

6071.25 

56632.1 

406489 

220.091 

4156.14 

42886.0 

67 

5645.86 

50560.9 

349857 

223.444 

3936.05 

38729.9 

68 

5231.48 

44915.0 

299296 

226.319 

3712.61 

34793.8 

69 

4828.26 

39683.5 

254381 

228.475 

3486.29 

31081.2 

70 

4436.52 

34855.2 

214697 

229.965 

3257.82 

27594.9 

71 

4056.51 

30418.7 

179842 

230.504 

3027.85 

24337.1 

72 

3688.83 

26362.2 

149423 

229.851 

2797.35 

21309.3 

73 

3334.23 

22673.4 

123061 

228.117 

2567.50 

18511.9 

74 

2993.37 

19339.2 

100388 

224.949 

2339.38 

15944.4 

75 

2667.20 

16345.8 

81048.4 

220.270 

2114.43 

13605.0 

76 

2356.72 

13678.6 

64702.6 

214.024 

1894.16 

11490.6 

77 

2063.00 

11321.9 

51024.0 

206.103 

1680.14 

9596.43 

78 

1787.14 

9258.89 

39702.1 

196.558 

1474.04 

7916.29 

79 

1530.15 

7471.75 

30443.2 

185.318 

1277.48 

6442.25 

80 

1293.08 

5941.60 

22971.4 

172.518 

1092.16 

5164.77 

81 

1076.84 

4648.52 

17029.8 

158.347 

919.640 

4072.61 

82 

882.076 

3571.68 

12381.3 

142.981 

761.293 

3152.97 

83 

709.266 

2689.60 

8809.60 

126.749 

618.312 

2391.68 

84 

558.532 

1980.33 

6120.00 

110.109 

491.563 

1773.37 

85 

429.535 

1421.80 

4139.67 

93.4121 

381.454 

1281.81 

86 

321.597 

992.266 

2717.87 

77.1605 

288.042 

!)()().  356 

87 

233.555 

670.669 

1725.60 

61.8643 

210.875 

612.314 

88 

163.793 

437.114 

1054.93 

47.8834 

149.011 

401  .  439 

89 

110.371 

273.321 

617.811 

35.6365 

101.128 

252.428 

90 

71.0020 

162.950 

344.490 

25.2992 

65.4913 

151.300 

91 

43.3015 

91.9475 

181.540 

17.0557 

40.1921 

85.808 

92 

24.7815 

48  .  6460 

89.592 

10.7684 

23.1364 

45.616 

93 

13.1750 

23.8645 

40.946 

6.34501 

12.3680 

22.480 

94 

6.38444 

10.6895 

17.082 

3.38888 

6.0230 

10.112 

95 

2.77965 

4.3050 

6.392 

1.61875 

2.6341 

4.089 

96 

1.06690 

1.5254 

2.087 

0.67537 

1.0153 

1.455 

97 

0.35546 

0.4585 

0.562 

0.24041 

0.3400 

0.440 

98 

0.10303 

0.1030 

0.103 

0.09955 

0.0995 

0.100 

315 


TABLE  VII. 

FRATERNAL  EXPERIENCE— THREE  PER  CENT. 
Commutation  Columns. 


X 

Dx  =  lxv* 

NX  =  SDX 

SX  =  ZNX 

cx= 

dx  v*+1 

MX  =  SCX 

Rx  =  2Mx 

20 

55367.6 

1340690 

25841300 

268.774 

16318.2 

588033 

21 

53486.2 

1285330 

24500600 

261.467 

16049.4 

571715 

22 

51666.9 

1231840 

23215300 

254.359 

15788.0 

555666 

23 

49907.6 

1180170 

21983500 

247.442 

15533.6 

539878 

24 

48206.7 

1130270 

20803300 

241.190 

15286.2 

524344 

25 

46561.3 

1082060 

19673000 

235.092 

15045.0 

509058 

26 

44970.0 

1035500 

18590900 

229.596 

14809.9 

494013 

27 

43430.0 

990527 

17555400 

224.220 

14580.3 

479203 

28 

41941.4 

947097 

16564900 

219.387 

14356  .  1 

464623 

29 

40500.4 

905155 

15617800 

215.057 

14136.7 

450267 

30 

39105.8 

864655 

14712700 

210.793 

13921.6 

436130 

31 

37756.0 

825549 

13848000 

206.983 

13710.8 

422208 

32 

36449.3 

787793 

13022500 

203.594 

13503.9 

408497 

33 

35184.2 

751344 

12234700 

200.593 

13300.3 

394993 

34 

33958.7 

716160 

11483400 

197.948 

13099.7 

381693 

35 

32771.7 

682201 

10767200 

195.633 

12901.7 

368593 

36 

31621.5 

649429 

10085000 

193.620 

12706.1 

355691 

37 

30506.9 

617808 

9435580 

192.208 

12512.5 

342985 

38 

29426.2 

587301 

8817770 

191.347 

12320.3 

330473 

39 

28377.7 

557875 

8230470 

190.678 

12128.9 

318153 

40 

27360.5 

529497 

7672600 

190.482 

11938.2 

306024 

41 

26373.2 

502136 

7143100 

190.713 

11747.7 

294086 

42 

25414.3 

475763 

6640960 

191.611 

11557.0 

282338 

43 

24482.4 

450349 

6165200 

192.839 

11365.4 

270781 

44 

23576.5 

425867 

5714850 

194.097 

11172.6 

259416 

45 

22695.7 

402290 

5288980 

195.376 

10978.5 

248243 

46 

21839.2 

379594 

4886690 

196.914 

10783  .  1 

237264 

47 

21006.2 

357755 

4507100 

198.923 

10586.2 

226481 

48 

20195.5 

336749 

4149340 

201.353 

10387.3 

215895 

49 

19406.0 

316553 

3812590 

203.928 

10185.9 

205508 

50 

18636.8 

297147 

3496040 

207.068 

9981.99 

195322 

51 

17886.9 

278511 

3198890 

210.927 

9774.93 

185340 

52 

17155.0 

260624  ' 

2920380 

214.804 

9564.00 

175565 

53 

16440.6 

243469 

2659760 

219.491 

9349.20 

166001 

54 

15742.2 

227028 

2416290 

224.314 

9129.70 

156652 

55 

15059.4 

211286 

2189260 

229.625 

8905.39 

147522 

56 

14391  .  1 

196227 

1977970 

235.549 

8675.77 

138617 

57 

13736.4 

181835 

1781740 

241.654 

8440.22 

129941 

58 

13094.7 

168099 

1599910 

247.902 

8198.56 

121501 

59 

12465.4 

155004 

1431810 

254.770 

7950.66 

113302 

60 

11847.5 

142539 

1276810 

261.685 

7695.89 

105351 

61 

11240.8 

130691 

1134270 

268.943 

7434.20 

97655.0 

62 

10644.4 

119451 

1003580 

276.177 

7165.26 

90220.8 

63 

10058.2 

108806 

884133 

283.515 

6889.08 

83055.5 

64 

9481.74 

98748.0 

775327 

290.630 

6605.57 

76166.4 

316 


TABLE  VII. 

FRATERNAL  EXPERIENCE— THREE  PER  CENT— Continued. 
Commutation  Columns. 


X 

Dx=lxv* 

NX  =  SDX 

SX=SNX 

cx= 

dxv*+1 

MX  =  SCX 

Rx  =  SMx 

65 

8914.96 

89266.2 

676579 

297.659 

6314.94 

69560.8 

66 

8357.63 

80351.3 

587313 

304.447 

6017.28 

63245.9 

67 

7809.77 

71993.6 

506962 

310.586 

5712.83 

57228.6 

68 

7271.72 

64183.9 

434968 

316.110 

5402.25 

51515.8 

69 

6743.21 

56912.1 

370784 

320.670 

5086.14 

46113.6 

70 

6226.71 

50168.9 

313872 

324.327 

4765.47 

41027.5 

71 

5721.03 

43942.2 

263703 

326  .  666 

4441.14 

36262.0 

72 

5227.28 

38221.2 

219761 

327.323 

4114.47 

31820.9 

73 

4748.14 

32993.9 

181540 

326.430 

3787.1") 

27706.4 

74 

4283.42 

28245.8 

148546 

323.458 

3460.72 

23919.2 

75 

3835.20 

23962.4 

120300 

318.268 

3137.26 

20458.5 

76 

3405.22 

20127.2 

96337.3 

310.744 

2819.00 

17321.2 

77 

2995.29 

16721.9 

76210.1 

300.696 

2508.25 

14502.2 

78 

2607.36 

13726.6 

59488.2 

288.163 

2207.56 

11994.0 

79 

2243.26 

11119.3 

45761.6 

273.003 

1919.39 

9786.42 

80 

1904.92 

8876.02 

34642.3 

255.381 

1646.39 

7867.03 

81 

1594.05 

6971.10 

25766.3 

235.540 

1391.01 

6220.64 

82 

1312.08 

5377.05 

18795.2 

213.715 

1155.47 

4829.63 

83 

1060.15 

4064.97 

13418.2 

190.374 

941.754 

3674.10 

84 

838.900 

3004.82 

9353.22 

166.184 

751.380 

2732.41 

85 

648.280 

2165.92 

6348.40 

141.668 

585.196 

1981.03 

86 

487.729 

1517.64 

4182.48 

117.598 

443.528 

1395.83 

87 

355.926 

1029.91 

2664.84 

94.7360 

325.930 

952.301 

88 

250.824 

673.989 

1634.93 

73.6822  ' 

231.194 

626.371 

89 

169.836 

423.165 

960.939 

55.1031 

157.511 

395.177 

90 

109.787 

253.329 

537.774 

39.3090 

102.408 

237.666 

91 

67.2800 

143.542 

284.445 

26.6291 

63.0992 

135.258 

92 

38.6913 

76.2623 

140.903 

16.8944 

36.4701 

72.1584 

93 

20.6700 

37.5710 

64.6402 

10.0029 

19.5757 

35.6883 

94 

10.0651 

16.9010 

27.0692 

5.36851 

9.5728 

16.1126 

95 

4.40339 

6.8359 

10.1682 

2.57680 

4.2043 

6.5398 

96 

1.69834 

2.4325 

3.3323 

1.08030 

1.6275 

2.3355 

97 

0.56858 

0.7342 

0.8998 

0.38641 

0.5472 

0.7080 

98 

0.16561 

0.1656 

0.1656 

0.16078 

0.1608 

0.1608 

TABLE  VIII. 

FRATERNAL  EXPERIENCE. 

Values  of  Life  Annuity  Due  of  $1  and  of  Single  and  Level  Premiums  for  $1,000 

Life  Insurance. 


X 

3%  Per  Cent  Basis. 

3  Per  Cent  Basis. 

_Nx 

ax~DT 

A  -M* 

Ax~DT 

P_Mx 
Px~Nx 

Nx 

a*=DT 

A          M* 

Ax=D7 

M, 
Px~Nx 

20 

22.218 

248.65 

11.19 

24.214 

294.72 

12.17 

21 

22.071 

253.62 

11.49 

24.031 

300.07 

12.49 

22 

21.919 

258.77 

11.81 

23.842 

305.57 

12.82 

23 

21.762 

264.10 

12.14 

23.647 

311.25 

13.16 

24 

21.599 

269.61 

12.48 

23.446 

317.10 

13.52 

25 

21.430 

275.31 

12.85 

23.239 

323.12 

13.90 

26 

21.256 

281.21 

13.23 

23.026 

329.33 

14.30 

27 

21.076 

287.30 

13.63 

22.807 

335.72 

14.72 

28 

20.889 

293.60 

14.06 

22.581 

342.29 

15.16 

29 

20.697 

300.11 

14.50 

22.348 

349.03 

15.62 

30 

20.498 

306.82 

14.97 

22.110 

356.00 

16.10 

31 

20.293 

313.75 

15.46 

21.865 

363.14 

16.61 

32 

20.082 

320.89 

15.98 

21.613 

370.48 

17.14 

33 

19.864 

328.26 

16.53 

21.355 

378.02 

17.70 

34 

19.640 

335.85 

17.10 

21.089 

385.75 

18.29 

35 

19.409 

343.66 

17.71 

20.817 

393.69 

18.91 

36 

19.171 

351.70 

18.35 

20.538 

401.82 

19.56 

37 

18.926 

359.98 

19.02 

20.251 

410.15 

20.25 

38 

18.675 

368.48 

19.73 

19.958 

418.68 

20.97 

39 

18.417 

377.20 

20.48 

19.659 

427.41 

21.74 

40 

18.152 

386.16 

21.27 

19.353 

436.33 

22.55 

41 

17.881 

395.34 

22.11 

19.040 

445.44 

23.40 

42 

17.603 

404.74 

22.99 

18.720 

454.74 

24.29 

43 

17.318 

414.36 

23  .-93 

18.395 

464.23 

25.24 

44 

17.028 

424.19 

24.91 

18.063 

473.89 

26.23 

45 

16.730 

434.24 

25.96 

17.725 

483.73 

27.29 

46 

16.427 

444.51 

27.06 

17.381 

493.75 

28.41 

47 

16.116 

455.01 

28.23 

17.031 

503.95 

29.59 

48 

15.799 

465.72 

29.48 

16.674 

514.34 

30.85 

49' 

15.476 

476.65 

30.80 

16.312 

524.89 

32.18 

50 

15.147. 

487.79 

32.20 

15.944 

535.61 

33.59 

51 

14.812 

499.13 

33.70 

15.571 

546.48 

35.10 

52 

14.471 

510.65 

35.29 

15.192 

557.50 

36.70 

53 

14.124 

522.37 

36.98 

14.809 

568.67 

38.40 

54 

13.733 

534.24 

38.79 

14.422 

579.95 

40.21 

55 

13.417 

546.28 

40.72 

14.030 

591.35 

42.15 

56 

13.057 

558.47 

42.77 

13.635 

602.85 

44.21 

57 

12.693 

570.78 

44.97 

13.238 

614.44 

46.42 

58 

12.325 

583.20 

47.32 

12.837 

626.10 

48.77 

59 

11.955 

595.73 

49.83 

12.435 

637.82 

51.29 

60 

11.582 

608.34 

52.52 

12.031 

649.58 

53.99 

61 

11.207 

621.01 

55.41 

11.627 

661.36 

56.88 

62 

10.832 

633.72 

58.51 

11.222 

673  .  14 

59.98 

63 

10.455 

646.45 

61.83 

10.818 

684.92 

63.31 

64 

10.079 

659.18 

65.41 

10.415 

696.66 

66.89 

65 

9.703 

671.89 

69.25 

10.013 

708.35 

70.74 

66 

9.328 

684.56 

73.39 

9.614 

719.97 

74.89 

67 

8.955 

697.16 

77.85 

9.219 

731.50 

79.35 

68 

8.586 

709.67 

82.66 

8.827 

742.91 

84.17 

69 

8.219 

722.06 

87.85 

8.439 

754.19 

89.37 

70 

7.856 

734.32 

93.47 

8.057 

765.33 

94.99 

318 


TABLE  IX. 

MODIFIED  Nx  COLUMNS  FOR  MONTHLY  PREMIUMS. 

National  Fraternal  Congress  Mortality  Table,  and  Three  Per  Cent,  Three  and 
One-Half  Per  Cent,  and  Four  Per  Cent  Interest. 


3% 

3|% 

4% 

3% 

3|% 

4% 

X 

N^2 

N12 

iN|X 

N^2 

X 

N12 

1NX 

N^2 

N^2 

20 

1315233 

1093510 

914228 

60 

137071 

98525.1 

70996.2 

21 

1260729 

1044150 

869496 

61 

125503 

89892.7 

64545.4 

22 

1208078 

996692 

826700 

62 

114537 

81749.1 

58489.1 

23 

1157219 

951072 

785758 

63 

104163 

74082.1 

52814.6 

24 

1108092 

907219 

746591 

64 

94370.2 

66880.0 

47509.8 

25 

1060641 

865066 

709123 

65 

85149.7 

60131.4 

42563.0 

26 

1014810 

824550 

673283 

66 

76491.7 

53825.1 

37962.6 

27 

970547 

785608 

639002 

67 

68386.6 

47950.1 

33697.4 

28 

927800 

748182 

606213 

68 

60825.0 

42495.5 

29756.5 

29 

886520 

712215 

574854 

69 

53796.9 

37450.1 

26128.8 

30 

846660 

677653 

544865 

70 

47291.7 

32802.8 

22803  .  3 

31 

808174 

644443 

516188 

71 

41298.3 

28541.8 

19768.9 

32 

771018 

612536 

488768 

72 

35805.0 

24655.2 

17014.4 

33 

735149 

581883 

462553 

73 

30798.8 

21130.2 

14528.2 

34 

700528 

552440 

437493 

74 

26265.3 

17953.5 

12298.5 

35 

667114 

524160 

413539 

75 

22188.9 

15111.0 

10312.9 

36 

634871 

497003 

390646 

76 

18552.4 

12587.4 

8558.49 

37 

603761 

470927 

368771 

77 

15336.6 

10366.5 

7022. 

38 

573750 

445894 

347872 

78 

12520.6 

8431  .  16 

5689.46 

39 

544806 

421867 

327909 

79 

10081.5 

6762.96 

4546.38 

40 

516895 

398810 

308844 

80 

7994.71 

5342.55 

3577.77 

41 

489988 

376689 

290641 

81 

6233.55 

4149.59 

2768.17 

42 

464056 

355473 

273266 

82 

4769.91 

3162.94 

2101.80 

43 

439069 

335130 

256686 

83 

3574.37 

2360.91 

1562.71 

44 

415003 

315630 

240870 

84 

2616.58 

1721.47 

1134.98 

45 

391831 

296946 

225788 

85 

1865.87 

1222.70 

802.943 

46 

369529 

279049 

211412 

86 

1291.89 

843.185 

551.505 

47 

348072 

261915 

197714 

87 

865.154 

562.391 

366.366 

48 

327439 

245517 

184668 

88 

557.873 

361.171 

234.330 

49 

307606 

229832 

172249 

89 

344.536 

222.143 

143.539 

50 

288554 

214837 

160433 

90 

202.498 

130.024 

83.671 

51 

270262 

200510 

149198 

91 

112.390 

71.8663 

46.055 

52 

252711 

186830 

138522 

92 

58.3464 

37.1528 

23.710 

53 

235885 

173778 

128385 

93 

27.9993 

17.7538 

11.282 

54 

219765 

161334 

118767 

94 

12.2399 

7.7281 

4.890 

55 

204337 

149482 

109650 

95 

4.7967 

3.0157 

1.900 

56 

189585 

138204 

101017 

96 

1.6460 

1.0305 

.646 

57 

175495 

127484 

92850.3 

97 

0.4708 

0.2936 

.184 

58 

162054 

117307 

85134.6 

98 

0.0889 

0.0552 

.034 

59 

149252 

107659 

77854.7 

319 


TABLE  X. 

VALUATION  COLUMNS  BY  THE  NATIONAL  FRATERNAL  CONGRESS  TABLE 
And  Three  Per  Cent,  Three  and  One-Half  Per  Cent,  and  Four  Per  Cent  Interest. 


3% 

$\% 

4% 

3% 

SWo 

4% 

X 

kx 

Ux 

a, 

Ux 

X 

kx 

Ux 

Ux 

Ux 

20 

5.025 

1.0352 

1.0402 

1.04523 

60 

23.280 

1.0540 

1.0591 

1.06421 

21 

5.061 

1.0352 

1.0402 

1.04526 

61 

25.266 

1.0560 

1.0612 

1.06627 

22 

5.097 

1.0352 

1.0403 

1.04530 

62 

27.458 

1.0583 

1.0634 

1.06856 

23 

5.133 

1.0353 

1.0403 

1.04534 

63 

29.901 

1.0608 

1.0660 

1.07110 

24 

5.180 

1.0353 

1.0404 

1.04539 

64 

32.600 

1.0636 

1.0687 

1.07390 

25 

5.228 

1.0354 

1.0404 

1.04544 

65 

35.615 

1.0667 

1.0719 

1.07704 

26 

5.287 

1.0354 

1  .0404 

1.04550 

66 

38.983 

1.0702 

1.0754 

1.08054 

27 

5.346 

1.0355 

1.0405 

1.04556 

67 

42.711 

1.0740 

1.0792 

1.08442 

28 

5.417 

1.0355 

1.0406 

1.04563 

68 

46.874 

1  .0783 

1.0835 

1.08875 

29 

5.499 

1.0357 

1.0407 

1.04572 

69 

51.499 

1  0830 

1.0883 

1.09356 

30 

5.583 

1.0358 

1.0408 

1  .04581 

70 

56.690 

1.0884 

1.0937 

1.09896 

31 

5.679 

1.0358 

1.0409 

1.04590 

71 

62.487 

1.0944 

1.0996 

1  .  10499 

32 

5.787 

1.0360 

1.0410 

1.04602 

72 

68.937 

1.1010 

.  1063 

1.11169 

33 

5.907 

1.0361 

1.0411 

1.04614 

73 

76.208 

1  .  1085 

.1139 

1.11935 

34 

6.040 

1.0362 

1.0413 

1.04628 

74 

84.339 

1.1169 

.1224 

1.12771 

35 

6.187 

1.0364 

1.0414 

1.04643 

75 

93.465 

1  .  1263 

.1317 

1  .  13720 

36 

6.347 

1.0365 

1.0416 

1.04660 

76 

103.744 

1  .  1369 

.1424 

1  .  14789 

37 

6.532 

1.0367 

1.0418 

1.04679 

77 

115.326 

.1488 

1  .  1544 

1  .  15994 

38 

6.743 

1.0369 

1.0420 

1.04700 

78 

128.457 

.  1623 

.1680 

1  .  17359 

39 

6.969 

1.0372 

1.0422 

1.04725 

79 

143.315 

1.1776 

.1833 

1.18905 

40 

7.223 

1.0374 

1.0425 

1.04751 

80 

160.208 

.1950 

1.2008 

1.20662 

41 

7.504 

1.0377 

1.0428 

1.04780 

81 

179.517 

.2149 

1.2208 

1.22670 

42 

7.826 

1.0381 

1.0431 

1.04814 

82 

201.590 

1.2376 

1.2437 

1.24965 

43 

8.179 

1.0384 

1.0435 

1.04851 

83 

226.934 

1.2637 

1.2699 

1.27601 

44 

8.552 

1.0388 

1.0438 

1.04889 

84 

256.346 

1.2940 

1.3003 

1.30660 

45 

8.946 

1.0392 

1.0443 

1.04931 

85 

290.463 

1.3292 

1.3356 

.34208 

46 

9.374 

1.0397 

1.0447 

1.04974 

86 

330.400 

1.3703 

1.3766 

.38361 

47 

9.850 

1.0401 

1.0452 

1.05024 

87 

377.700 

1.4190 

1.4259 

.43280 

48 

10.376 

1.0407 

1.0457 

1.05079 

88 

433.842 

1.4769 

1.4840 

.49119 

49 

10.942 

1.0413 

1.0463 

1.05138 

89 

501.910 

1.5470 

1.5545 

.56199 

50 

11.577 

1.0419 

1.0470 

1.05204 

90 

584.258 

1.6318 

1.6397 

1.64763 

51 

12.295 

1.0427 

1.0477 

1.05279 

91 

688.245 

1.7389 

1.7474 

1.75578 

52 

13.065 

1.0435 

1.0485 

1.05358 

92 

817.337 

1.8719 

1.8810 

1.89003 

53 

13.943 

1.0444 

1.0494 

1.05450 

93 

993.827 

2.0536 

2.0636 

2.07358 

54 

14.895 

1.0453 

1.0504 

1.05549 

94 

1219.180 

2.2858 

2.2968 

2.30794 

55 

15.956 

1.0464 

1.0515 

1.05659 

95 

1517.240 

2.5928 

2.6054 

2.61793 

56 

17.148 

1.0477 

1.0527 

1.05783 

96 

1900.000 

2.9870 

3.0014 

3.01600 

57 

18.454 

1.0490 

1.0541 

1.05919 

97 

2333.333 

3.4333 

3.4501 

3.46667 

58 

19.887 

1.0505 

1.0556 

1.06068 

59 

21.504 

1.0522 

1.0573 

1.06237 

320 


TABLE  XL 
MAKEHAMIZED  NATIONAL  FRATERNAL  CONGRESS  TABLE  OF  MORTALITY 

(Graduation  by  Landis.) 


Age. 

Ix- 

dx. 

Px- 

Qx. 

MX. 

20 

100000 

503 

.99497 

.00503 

.005029 

21 

99497 

504 

.99493 

.00507 

.005062 

22 

98993 

506 

.99489 

.00511 

.005098 

23 

98487 

507 

.99485 

.00515 

.005138 

24 

97980 

509 

.994  SI 

.00519 

.005183 

25 

97471 

511 

.99476 

.00524 

.005232 

26 

96960 

514 

.99470 

.00530 

.005280 

27 

96446 

517 

.99464 

.00536 

.005346 

28 

95929 

521 

.99457 

.  00543 

.005412 

29 

95408 

526 

.99449 

.00551 

.005486 

30 

94882 

531 

.99440 

.00560 

.005567 

31 

94351 

537 

.99431 

.00569 

.005657 

32 

93814 

543 

.99421 

.00579 

.005756 

33 

93271 

551 

.99409 

.00591 

.005867 

34 

92720 

560 

.99396 

.00604 

.005988 

35 

92160 

569 

.99383 

.00617 

.006123 

30 

91591 

580 

.99367 

.00633 

.006272 

37 

91011 

592 

.99350 

.00650 

.006437 

38 

90419 

606 

.99330 

.00670 

.006620 

39 

89813 

620 

.99310 

.00690 

.  000822 

40 

89193 

637 

.99286 

.00714 

.  007045 

41 

88556 

655 

.99260 

.00740 

.007293 

42 

87901 

676 

.99231 

.00769 

.007566 

43 

87225 

698 

.  99200 

.00800 

.007809 

44 

86527 

723 

.99164 

.00836 

.008204 

45 

85804 

749 

.99127 

.00873 

.008575 

46 

85055 

780 

.99083 

.00917 

.008985 

47 

84275 

812 

.99036 

.00964 

.009439 

48 

83463 

848 

.98984 

.01016 

.009941 

49 

82615 

888 

.98925 

.01075 

.010496 

50 

81727 

930 

.98862 

.01138 

.011111 

51 

80797 

976 

.98792 

.01208 

.011791 

52 

79821 

1028 

.98712 

.01288 

.012544 

53 

78793 

1082 

.98627 

.01373 

.013377 

54 

77711 

1141 

.98532 

.01468 

.014298 

55 

76570 

1206 

.98425 

.01575 

.015318 

56 

75364 

1275 

.98308 

.01692 

.016446 

57 

74089 

1349 

.98179 

.01821 

.017694 

58 

72740 

1428 

.98037 

.01963 

.019075 

59 

71312 

1512 

.97880 

.02120 

.020603 

60 

69800 

1601 

.97706 

.02294 

.022293 

61 

68199 

1696 

.97513 

.02487 

.024164 

62 

66503 

1795 

.97301 

.02699 

.026234 

63 

64708 

1898 

.97067 

.02933 

.028524 

64 

62810 

2005 

.96808 

.03192 

.031058 

65 

60805 

2114 

.96523 

.03477 

.033862 

321 


TABLE  XL 

MAKEHAMIZED  NATIONAL  FRATERNAL  CONGRESS  TABLE  OF  MORTALITY 

— Continued. 

(Graduation  by  Landis — Continued.) 


Age. 

1*. 

dx. 

Px. 

Qx. 

/V 

66 

58091 

2225 

.96209 

.03791 

.036995 

67 

56466 

2337 

.95861 

.04139 

.040387 

68 

54129 

2447 

.95479 

.04521 

.044185 

69 

51682 

2554 

.95058 

.04942 

.048398 

70 

49128 

2656 

.94594 

.05406 

.053048 

71 

46472 

2750 

.94082 

.05918 

.058193 

72 

43722 

2832 

.93523 

.06477 

.063885 

73 

40890 

2902 

.92903 

.07097 

.070184 

74 

37988 

2954 

.92224 

.07776 

.077154 

75 

35034 

2985 

.91480 

.08520 

.084865 

76 

32049 

2993 

.90661 

.09339 

.093397 

77 

29056 

2974 

.89765 

.10235 

.102838 

78 

26082 

2925 

.88785 

.11215 

.113284 

79 

23157 

2846 

.87710 

.  12290 

.124842 

80 

20311 

2734 

.86539 

.13461 

.  137631 

81 

17577 

2591 

.85259 

.  14741 

.151781 

82 

14986 

2418 

.83865 

.  16135 

.167438 

83 

12568 

2218 

.82352 

.  17648 

.184761 

84 

10350 

1997 

.80705 

.  19295 

.203929 

85 

8353 

1761 

.78918 

.21082 

.225138 

86 

6592 

1516 

.77002 

.22998 

.248605 

87 

5076 

1273 

.74921 

.25079 

.274570 

88 

3803 

1038 

.72706 

.27294 

.303299 

89 

2765 

821 

.70307 

.29693 

.335087 

90 

1944 

627 

.67747 

.32253 

.370259 

91 

1317 

461 

.64996 

.35004 

.409176 

92 

856 

324 

.62150 

.37850 

.452236 

93 

532 

217 

.59211 

.40789 

.499881 

94 

315 

139 

.55873 

.44127 

.552598 

95 

176 

83 

.52841 

.47159 

.610928 

96 

93 

48 

.48387 

51613 

.675468 

97 

45 

24 

.46667 

.53333 

.746879 

98 

21 

12 

.42857 

.57143 

.825893 

99 

9 

6 

.33333 

.66667 

.913319 

100 

3 

3 

.00000 

1.00000 

1.010053 

Constants:     k  =  110239. 3. 


s  =  .9955888.        g  =  .  9994988. 


c  =  1.1064652. 


322 


TABLE  XII. 
COMMUTATION  COLUMNS. 

Makehamizcd  National  Fraternal  Congress  Table  of  Mortality  and  4  Per  Cent  Interest. 


Age. 

Dx. 

N». 

Age. 

Dx. 

N«. 

20 

45639.0000 

935010.000 

61 

6233.6000 

67431.500 

21 

43663.0000 

SS937  1.000 

62 

5844.8000 

61197.900 

22 

41770.0000 

'  845708.000 

63 

5468.4000 

55353  .  100 

23 

39959.0000 

803938.000 

64 

5103.8000 

49884.700 

24 

38224.0000 

763979.000 

65 

4750.9000 

44780.900 

25 

36563.0000 

725755.000 

66 

4409.3000 

40030.000 

20 

34973.0000 

689192.000 

67 

4079.0000 

35620.700 

27 

33449.0000 

654219.000 

68 

3759.8000 

31541.700 

28 

31990.0000 

620770.000 

69 

3451.8000 

27781.900 

29 

30593.0000 

588780.000 

70 

3155.0000 

24330.100 

30 

29254.0000 

558187.000 

71 

2869.6000 

21175.100 

31 

27971.0000 

528933.000 

72 

2596.0000 

18305.500 

32 

26743.0000 

500962.000 

73 

2334.4000 

15709.500 

33 

25565.0000 

474219.000 

74 

2085.4000 

13375.100 

34 

24436.0000 

448654.000 

75 

1849.2000 

11289.700 

35 

23355.0000 

424218.000 

76 

1626.6000 

9440.540 

36 

22318.0000 

400863.000 

77 

1418.0000 

7813.940 

37 

21324.0000 

378545.000 

78 

1223.9000 

6395.940 

38 

20370.0000 

357221.000 

79 

1044.8000 

5172.040 

39 

19455.0000 

336851.000 

80 

881.1800 

4127.240 

40 

18578.0000 

317396.000 

81 

733.2200 

3246.060 

41 

17736.0000 

298818.000 

82 

601  .  1000 

2512.840 

42 

16927.0000 

281082.000 

83 

484.7200 

1911.740 

43 

16151.0000 

264155.000 

84 

383.8200 

1427.020 

44 

15406.0000 

248004.000 

85 

297.8500 

1043.200 

45 

14690..  0000 

232598.000 

86 

226.0400 

745.350 

46 

14001.0000 

217908.000 

87 

167.3600 

519.310 

47 

13339.0000 

203907.000 

88 

120.5700 

351.950 

48 

12703.0000 

190568.000 

89 

84.2730 

231.378 

49 

12090.0000 

177865.000 

90 

56.9660 

147  .  105 

50 

11500.0000 

165775.000 

91 

37.1090 

90.139 

51 

10932.0000 

154275.000 

92 

23.2030 

53.030 

52 

10384.0000 

143343.000 

93 

13.8660 

29.827 

53 

9856.5000 

132958.600 

94 

7.8805 

15.961 

54 

9347.2000 

123102.100 

95 

4.2372 

8.0805 

55 

8855.7000 

113754.900 

96 

2.1426 

3.8433 

56 

8381.0000 

104899.200 

97 

1.0123 

1.7007 

57 

7922.4000 

96518.200 

98 

.44365 

.68839 

58 

7479.0000 

88595.800 

99 

.17892 

.24474 

59 

7050.1000 

81116.800 

100 

.065815 

.065815 

60 

6635.2000 

74066.700 

TABLE  XIII. 
ANNUITIES,  SINGLE  PREMIUMS  AND  ANNUAL  PREMIUMS— ONE  LIFE. 

Makehamized  National  Fraternal  Congress  Table  of  Mortality  and  4  Per  Cent  Interest. 


Age. 

Immediate  Life  Annuity. 
ax. 

Single  Premium  Per  $1,000. 

Ax. 

Annual  Premium  Per  $1,000. 
Px. 

20 

$20.487 

$212.02 

$  10.35 

21 

20.369 

216.56 

10.63 

22 

20.247 

221.28 

10.93 

23 

20.119 

226.18 

11.24 

24 

19.987 

231.27 

11.57 

25 

19.849 

236.55 

11.92 

26 

19.707 

242.04 

12.28 

27 

19.559 

247.74 

12.67 

28 

19.405 

253.64 

13.07 

29 

19.246 

259.77 

13.50 

30 

19.081 

266.11 

13.95 

31 

18.910 

272.69 

14.42 

32 

18.733 

279.50 

14.92 

33 

18.550 

286.55 

15.45 

34 

18.360 

293.84 

16.00 

35 

18.164 

301.37 

16.59 

36 

17.962 

309.16 

17.21 

37 

17.753 

317.20 

17.87 

38 

17.537 

325.51 

18.56 

39 

17.314 

334.07 

19.30 

40 

17.085 

342.89 

20.07 

41 

16.848 

351.98 

20.89 

42 

16.605 

361.33 

21.76 

43 

16.355 

370.95 

22.68 

44 

16.098 

380.84 

23.66 

45 

15.834 

390.98 

24.69 

46 

15.564 

401.39 

25.79 

47 

15.286 

412.06 

26.96 

48 

15.002 

422.98 

28.20 

49 

14.712 

434.15 

29.51 

50 

14.415 

445.57 

30.91 

51 

14.112 

457.21 

32.40 

52 

13.804 

469.08 

33.98 

53 

13.489 

481.17 

35  ,67 

54 

13.170 

493.46 

37.47 

55 

12.845 

505.94 

39.39 

56 

12.516 

518.60 

41.43 

57 

12.183 

531.42 

43.62 

58 

11.846 

544.38 

45.96 

59 

11.506 

557.47 

48.45 

60 

11.163 

570.66 

51.12 

61 

10.817 

583.94 

53.98 

62 

10.471 

597.28 

57.04 

63 

10.123 

610.67 

60.33 

64 

9.774 

624.07 

63.85 

65 

9.426 

637.46 

67.63 

66 

9.079 

650.82 

71.69 

67 

8.733 

664.12 

76.05 

68 

8.389 

677.33 

80.74 

69 

8.049 

690.43 

85.78 

70 

7.712 

703.39 

91.21 

71 

7.379 

716.19 

97.06 

72 

7.051 

728.79 

103.35 

73 

6.730 

741.17 

110.14 

74 

6.414 

753.31 

117.45 

75 

6.105 

765  .  19 

125.34 

76 

5.804 

776.77 

133.84 

77 

5.  Ml 

788.05 

143.01 

78 

5.226 

799.00 

152.89 

79 

4.950 

809.61 

163.55 

80 

4.684 

819.85 

175.04 

324 


TABLE  XIV. 
MAKEHAMIZED  NATIONAL  FRATERNAL 
CONGRESS. 

Table  Showing  the  Addi- 
tion to  be  made  to  the 
Younger  of  Two  Lives  in 
order  to  obtain  the 
Equivalent  Equal  Ages. 

Age. 

Ixx 

dxx 

log.  Ixx 

log.  dxx 

20 
21 
22 
23 
24 
25 

26 
27 
28 
29 
30 

31 
32 
33 
34 
35 

36 
37 
38 
39 
40 

41 
42 
43 
44 
45 

46 
47 
48 
49 
50 

51 
52 
53 
54 
55 

56 

57 
58 
59 
60 

61 
62 
63 
64 
65 

10000000000 
9899700000 
9799600000 
9699700000 
9000200000 
9500800000 

9401300000 
9301900000 
9202400000 
9102700000 
9002600000 

8902000000 
8801200000 
8699400000 
8596900000 
8493600000 

8388800000 
8283000000 
8175600000 
8066400000 
7955400000 

7842100000 
7726500000 
7608200000 
7486900000 
7362400000 

7234400000 
7102300000 
6966100000 
6825300000 
6679400000 

6528100000 
6371300000 
6208400000 

6039100000 
5862900000 

5679800000 
5489100000 
5291100000 
5085500000 
4872000000 

4651000000 
4422600000 
4187100000 
3945100000 
3697300000 

100300000 
100100000 
99900000 
99500000 
99400000 
91)500000 

99400000 
99500000 
99700000 
100100000 
100600000 

100800000 
101800000 
102500000 
103300000 
104800000 

105800000 
107400000 
109200000 
111000000 
113300000 

115600000 
118300000 
121300000 
124500000 
128000000 

132100000 
136200000 
140800000 
145900000 
151300000 

156800000 
162900000 
169300000 

176200000 
183100000 

190700000 
198000000 
205600000 
213500000 
221000000 

228400000 
235500000 
242000000 
247800000 
252600000 

10.0000000 
9.9956174 
.9912050 
.9867596 
.9822776 
.9777552 

.9731880 
.9685712 
.9638996 
.9591674 
.9543680 

.9494944 
.9445386 
.9394918 
.9343444 
.9290856 

.9237036 
.9181852 
.9125160 
.9066800 
.9006594 

.8944344 
.8879834 
.8812822 
.8743042 
.8670200 

.8593970 
.8513992 
.8429866 
.8341150 
.8247356 

.8147942 
.8042310 
.7929798 
.7809674 
.7681128 

.7543264 
.7395090 
.7235508 
.7063304 
.6877134 

.6675510 
.6456786 
.6219142 
.5960564 

.5678824 

8.00130 
.00043 
7.99957 
.99782 
.99739 
.99782 

.99739 
.99782 
.99870 
8.00043 
.00260 

.00346 
.00775 
.01072 
.01410 
.02036 

.02449 
.03100 
.03822 
.04532 
.05423 

.06296 
.07298 
.08386 
.09517 
.10721 

.12090 
.13418 
.  14860 
.16406 
.  17984 

.19535 
.21192 
.22866 
.24601 
.26269 

.28035 
.29667 
.31302 
.32940 
.34439 

.35870 
.37199 
.38382 
.39410 
.40243 

Difference  of  Ages. 
(Years.) 

Add  to 
Younger 
Age. 

1  

.50 

1.05 
1.60 
2.19 
2.81 
3.44 

4.10 
4.78 
5.48 
6.21 
6.96 

7.72 
8.50 
9.29 
10.10 
10.93 

11.77 
12.62 
13.49 
14.37 
15.26 

16.16 
17.07 
17.98 
18.91 
19.83 

20.77 
21.71 
22.65 
23.61 
24.56 

25.52 
26.48 
27.44 

28.42 
29.40 

30.37 
31.35 
32.33 
33.31 
34.30 

2 

3 

4 

5  
6  

7 

8 

9 

10 

11 

12  

13  

14  

15  

16 

17 

18  
19  
20  
21  

22 

23 

24   

25  

26  

27  

28  

29 

30 

31  .      

32.. 

33  

34 

35 

36  

37  

38 

39          .  . 

40  
41  

325 


TABLE  XIV. 
MAKEHAMIZED  NATIONAL  FRATERNAL 
CONGRESS—  Con  tinned  . 

Table  Showing  the  Addi- 
tion to  be  made  to  the 
Younger  of  Two  Lives  in 
order    to     obtain    the 
Equivalent  Equal  Ages  — 

Age. 

Lx 

dxx                 log.  Ixx 

log.  dxx 

Continued. 

66 

3444700000 

256300000 

.5371456 

40S7'"i 

67 
68 
69 

3188400000 
2929900000 
2671000000 

258500000 
258900000 
2574QOOOO 

'5035730 
.4668628 
.4266810 

.  ^UO  1  O 

.41246 
.41313 
.41061 

Differences  of  Ages. 
(Years.) 

Add  to 
Younger 

Acre 

70 

2413600000 

•  254000000 

.3826580 

.40483 

.rvgc. 

71 

2159600000 

247900000 

.3343848 

.39428 

42  

35.28 

72 

1911700000 

239700000 

.2814088 

.37967 

43 

36.27 

73 

1G720000CO 

228900000 

.2232294 

.35965 

44 

37.26 

74 

1443100000 

215700000 

.1592926 

.33385 

45 

38.25 

75 

1227400000 

200300000 

.0889854 

.30168 

46  

39.24 

76 

1027100000 

182850000 

.0116296 

.26210 

47  

40.23 

77 

844250000 

163970000 

8.9264748 

.21476 

48  

41.22 

78 

680280000 

144040000 

.8326906 

.15848 

49  

42.21 

79 

536240000 

123710000 

.7293582 

.09240 

50  

43.20 

80 

412530000 

103590000 

.6154612 

.01532 

81 

308940000 

84370000 

.4898748 

7.92619 

82 

224570000 

66620000 

.3513544 

.82360 

83 

157950000 

50830000 

.  1985230 

.70612 

84 

107120000 

37350000 

.0298570 

.57229 

85 

69770000 

26309000 

7.8436706 

.42010 

86 

43461000 

17693000 

.6380984 

.24780 

87 

25768000 

11303000 

.4110766 

.05319 

88 

14465000 

6821200 

.1603216 

6.83386 

89 

.    7643800 

3866000 

6.8833066 

.58726 

90 

3777800 

2043900 

.5772358 

.31046 

91 

1733900 

1000700 

.2390158 

.00030 

92 

733200 

450020 

5.8652238 

5.65323 

93 

283180 

184240 

.4520726 

.26538 

94 

98940 

68002 

4.9953718 

4.83252 

95 

30938 

22382 

.4904850 

.34990 

96 

8556 

6490 

3.9322820 

3.81224 

97 

2066 

1637 

.3150864 

.21405 

98 

429 

354 

2.6326176 

2.54900 

99 

75 

64 

1  .  8779264 

1.80618 

100 

11 

11 

.0433234 

.04139 

326 


TABLE  XV. 
COMMUTATION  COLUMNS  FOR  JOINT  LIVES. 

Makehamized  National  Fraternal  Congress  Table  of  Mortality  and  4  Per  Cent  Interest. 


Age. 

D^ 

NX* 

Cxx 

Mxx 

20 

4563900000 

83340300000 

44015000 

1358500000 

21 

4344300000 

78776400000 

42238000 

1314500000 

22 

4135000000 

74432100000 

40532000 

1272200000 

23 

3935400000 

70297100000 

38817000 

1231700000 

24 

3745200000 

66361700000 

37287000 

1192900000 

25 

3563900000 

62616500000 

35888000 

1155600000 

26 

3390900000 

59052600000 

34474000 

1119700000 

27 

3226000000 

55661700000 

33181000 

1085200000 

28 

3068800000 

52435700000 

31969000 

1052000000 

29 

2918800000 

49366900000 

30862000 

1020100000 

30 

2775700000 

46448100000 

29824000 

989200000 

31 

2639100000 

43672400000 

28734000 

959380000 

32 

2508800000 

41033300000 

27903000 

930650000 

33 

2384500000 

38524500000 

27014000 

902740000 

34 

2265700000 

36140000000 

26178000 

875730000 

35 

2152400000 

33874300000 

25536000 

849550000 

36 

2044100000 

31721900000 

24789000 

824020000 

37 

1940700000 

29677800000 

24195000 

799230000 

38 

1841800000 

27737100000 

23655000 

775030000 

39 

1747400000 

25895300000 

23120000 

751380000 

40 

1657000000 

24147900000 

22691000 

728260000 

41 

1570600000 

22490900000 

22262000 

705570000 

42 

1487900000 

20920300000 

21905000 

683300000 

43 

1408800000 

19432400000 

21597000 

661400000 

44 

1333000000 

18023600000 

21314000 

639800000 

45 

1260400000 

16690600000 

21071000 

618490000 

46 

1190900000 

15430200000 

20909000 

597420000 

47 

1124200000 

14239300000 

20729000 

576510000 

48 

1060200000 

13115100000 

20605000 

555780000 

49 

998810000 

12054900000 

20530000 

535170000 

50 

939870000 

11056100000 

20471000 

514640000 

51 

883270000 

10116250000 

20400000 

494170000 

52 

828890000 

9232980000 

20377000 

473770000 

53 

776630000 

8404090000 

20364000 

453400000 

54 

726390000 

7627460000 

20379000 

433030000 

55 

678080000 

6901070000 

20362000 

412650000 

56 

631630000 

6222990000 

20392000 

392290000 

57 

586960000 

5591360000 

20358000 

371900000 

58 

544020000 

5004400000 

20326000 

351540000 

59 

502760000 

4460380000 

20296000 

331210000 

60 

463140000 

3957620000 

20200000 

310920000 

61 

425130000 

3494480000 

20074000 

290720000 

62 

388700000 

3069350000 

19902000 

270640000 

63 

353850000 

2680650000 

19665000 

250740000 

64 

320570000 

2326800000 

19361000 

231080000 

65 

288880000 

2006230000 

18977000 

211720000 

327 


TABLE  XV. 
COMMUTATION  COLUMNS  FOR  JOINT  LIVES— Continued. 

Makehamized  National   Fraternal  Congress  Table  of   Mortality  and  4  Per  Cent  Interest- 
Continued. 


Age. 

D^ 

Nxx 

c« 

MX* 

66 

258790000 

1717350000 

18515000 

192740000 

67 

230320000 

1458560000 

17955000 

174220000 

68 

203510000 

1228240000 

17291000 

156270000 

69 

178390000 

1024730000 

16530000 

138980000 

70 

155000000 

846340000 

15684000 

122450000 

71 

133360000 

691340000 

14719000 

106760000 

72 

113504000 

557980000 

13685000 

92046000 

73 

95454000 

444476000 

12566000 

78361000 

74 

79218000 

349022000 

11385000 

65795000 

75 

64787000 

269804000 

10166000 

54410000 

76 

52131000 

205017000 

8923400 

44244000 

77 

41201000 

152886000 

7694100 

35320000 

78 

31922000 

111685000 

6499100 

27626000 

79 

24195000 

79763000 

5367000 

21127000 

80 

17897000 

55568000 

4321400 

15760000 

81 

12888000 

37669600 

3384200 

11439000 

82 

9007800 

24781600 

2569400 

8054600 

83 

6091900 

15773800 

1885000 

5485200 

84 

3972400 

9681900 

1331900 

3600200 

85 

2487900 

5709500 

902050 

2268300 

86 

1490200 

3221600 

583310 

1366300 

87 

849530 

1731380 

358310 

782940 

88 

458550 

881850 

207920 

424630 

89 

232991 

423300 

113310 

216710 

90 

110720 

190309 

57601 

103400 

91 

48863 

79589 

27116 

45802 

92 

19868.2 

30726 

11725 

18686 

93 

7378.6 

10857.8 

4615.8 

6960.8 

94 

2478.8 

3479.2 

1638.1 

2345. 

95 

745.28 

1000.44 

518.4 

706.92 

96 

198.19 

255.164 

144.6 

188.52 

97 

46.010 

56.974 

35.1 

43.92 

98 

9  .  1907 

10.9641 

7.3 

8.82 

99 

1.5546 

1.7734 

1.3 

1.52 

100 

.21877 

.21877 

.22 

.22 

328 


TABLE  XVI. 

ANNUITIES,   SINGLE   PREMIUMS  AND   ANNUAL  PREMIUMS— TWO   LIVES, 

EQUAL  AGES. 

Makehamized  National  Fraternal  Congress  Table  of  Mortality  and  4  Per  Cent  Interest. 


Immediate  Joint 
Life  Annuity 

Immediate  Joint 
Life  Annuity 

Age 

axx 

Axx 

Pxx 

Age 

axx 

Axx 

Pxx 

20 

18.2609 

297.65 

16.30 

61 

8.2199 

683.85 

83.19 

21 

18.1334 

302.55 

16.69 

62 

7.8965 

696.28 

88.18 

22 

18.0007 

307.66 

17.09 

63 

7.5758 

708.62 

93.54 

23 

17.8626 

312.97 

17.52 

64 

7.2583 

720.83 

99.31 

24 

17.7190 

318.49 

17.98 

65 

6.9449 

732.89 

105.53 

25 

17.5698 

324.23 

18.45 

66 

6.6361 

744.76 

112.23 

26 

17.4148 

330.19 

18.96 

67 

6.3326 

756.43 

119.45 

27 

17.2538 

336.38 

19.50 

68 

6.0351 

767.88 

127.23 

28 

17.0868 

342.81 

20.06 

69 

5.7442 

779.07 

135.63 

29 

16.9136 

349.47 

20.66 

70 

5.4604 

789.98 

144.68 

30 

16.7340 

356.38 

21.30 

71 

5.1841 

800.61 

154.43 

31 

16.5480 

363.53 

21.97 

72 

4.9160 

SI  0.92 

164.95 

32 

16.3555 

370.93 

22.68 

73 

4.6564 

829.90 

176.30 

33 

16.1561 

378.59 

23.43 

74 

4.4058 

830.54 

188.51 

34 

15.9506 

386.51 

24.23 

75 

4.1645 

839.82 

201.66 

35 

15.7381 

394.68 

25.08 

76 

3.9327 

848.73 

215.81 

36 

15.5187 

403.12 

25.98 

77 

3.7107 

857.28 

231.03 

37 

15.2926 

411.82 

26.93 

78 

3.4987 

865.43 

247.36 

38 

15.0595 

420.78 

27.94 

79 

3.2967 

873.20 

264.87 

39 

14.8198 

430.00 

29.02 

80 

3.1048 

880.58 

283.62 

40 

14.5732 

439.49 

30.16 

81 

2.9229 

887.58 

303.66 

41 

14.3199 

449.23 

31.37 

82 

2.7511 

894.19 

325.03 

42 

14.0600 

459.22 

32.66 

83 

2.5893 

900.41 

347.74 

43 

13.7936 

469.47 

34.04 

84 

2.4373 

906.26 

371.,  S3 

44 

13.5208 

479.96 

35.50 

85 

2.2949 

911.73 

397.29 

45 

13.2420 

490.69 

37.06 

86 

2.1619 

916.85 

424.09 

46 

12.9571 

501.64 

38.72 

87 

2.0381 

921.61 

452.20 

47 

12  .  6665 

512.82 

40.49 

88 

1.9230 

926.03 

481.53 

48 

12.3705 

524.21 

42.38 

89 

1.8168 

930.12 

511.95 

49 

12.0693 

535.79 

44.39 

90 

1.7188 

933.88 

543.34 

50 

11.7634 

547.55 

46.55 

91 

1.6288 

937.35 

575.48 

51 

11.4532 

559.49 

48.85 

92 

1.5465 

940.52 

608.16 

52 

11.1390 

571.57 

51.31 

93 

1.4715 

943.40 

641.10 

53 

10.8213 

583.79 

53.95 

94 

1.4036 

946.01 

673.99 

54 

10.5006 

596.13 

56.77 

95 

1.3424 

948.37 

706.49 

55 

10.1774 

608.56 

59.80 

96 

1.2875 

950.48 

738.25 

56 

9.8523 

621.06 

63.04 

97 

.2383 

952.37 

769.10 

57 

9.5260 

633.61 

66.51 

98 

.1930 

954.12 

799.80 

58 

9.1989 

646.19 

70.25 

99 

1  .  1  407 

956.13 

838.17 

59 

8.8718 

658.77 

74.26 

100 

.  0000 

961.53 

961.53 

60 

8.5452 

671.33 

78.56 

TABLE  XVII. 

FRATERNAL  CONGRESS  EXPERIENCE,  FOUR  PER  CENT— WHOLE  LIFE 

POLICY  FOR  $1000. 


Age, 

Net  Reserve  at  End  of  Year. 

1 

* 

3 

4 

5 

6 

? 

8 

9 

10 

11 

12 

20 

$  5.78 

$11.79 

$18.04 

$24.53 

$31.27 

$38.27 

$45.53 

$53.07 

-160.89 

$68.99 

$77.37 

$86.06 

21 

6.04 

12.32 

18.85 

25.63 

32.67 

39.98 

47  .  56 

55.42 

63.57 

72.00 

80.74 

89.78 

22 

6.32 

12.89 

19.71 

26.80 

34.15 

41  .  78 

49.69 

57.8S 

66.37 

75.16 

84  26 

93.66 

23 

6.62 

13.48 

20.61 

28.01 

35.69 

43.65 

51.89 

60.44 

69.28 

78.43 

87.90 

97.68 

24 

6.91 

14.09 

21.54 

29.26 

37.28 

45.58 

54.18 

63.08 

72.30 

81.83 

91.67 

101.85 

25 

7.23 

14.73 

22.51 

30.58 

38.94 

47.60 

56.56 

65.84 

75.44 

85.35 

95.60 

106.18 

26 

7.55 

15.39 

23.52 

31.94 

40.66 

49.69 

59.04 

68.70 

78.69 

89.01 

99.66 

110.65 

27 

7.90 

10.09 

24.57 

33.36 

42.46 

51.88 

61.62 

71.68 

82.08 

92.82 

103.89 

115.29 

28 

8.26 

16.81 

25.67 

34.84 

44.33 

54.15 

64.29 

74.77 

85.59 

96.75 

108.25 

120.08 

29 

8.62 

17.56 

26.81 

36.38 

46.27 

56.50 

67.07 

77.98 

89.23 

100.82 

112.76 

125.04 

30 

9.01 

18.34 

28.00 

37.98 

48.30 

58.96 

69.96 

81.31 

93.00 

105.04 

117.43 

130.16 

31 

9.41 

19.15 

29.22 

39.64 

50.39 

61.50 

72.95 

84.75 

96.90 

109.40 

122.25 

135.43 

32 

9.84 

20.01 

30.52 

41.38 

52.59 

64.15 

76.06 

88.33 

100.95 

113.91 

127.22 

140.88 

33 

10.27 

20.88 

31.85 

43.17 

54.85 

66.87 

79.26 

92.00 

105.10 

118.54 

132.33 

146.47 

34 

10.73 

21.81 

33.25 

45.05 

57.20 

69.72 

82.59 

95.83 

109.41 

123.34 

137.62 

152.28 

35 

11.20 

22.77 

34.69 

46.98 

59.63 

72.64 

86.02 

99.75 

113.83 

128.27 

143.08 

158.27 

36 

11.69 

23.75 

36.18 

48.97 

62.13 

75.66 

89.55 

103.79 

118.39 

133.37 

148.73 

164.46 

37 

12.19 

24.76 

37.70 

51.02 

64.71 

78.76 

93.17 

107.95 

123.10 

138.64 

154.56 

170.84 

38 

12.73 

25.84 

39.32 

53.18 

67.40 

81.99 

96.95 

112.29 

128.02 

144.13 

160.61 

177.47 

30 

13.27 

26.93 

40.96 

55.37 

70.14 

85.30 

100.84 

116.77 

133.09 

149.79 

166.86 

184.31 

40 

13.84 

28.07 

42.67 

57.64 

73.00 

88.75 

104.90 

121.44 

138.36 

155.66 

173.34 

191.36 

41 

14.43 

29.23 

44.42 

59.99 

75.96 

92.34 

109.11 

126.26 

143.81 

161.74 

180.02 

198.65 

42 

15.03 

30.44 

46.23 

62  .  44 

79.05 

96.07 

113.48 

131.29 

149.47 

168.02 

186.92 

206.15 

43 

15.65 

31.69 

48.14 

65.01 

82.29 

99.96 

118.04 

136.50 

155.33 

174.52 

194.05 

213.89 

44 

16.30 

33.02 

50.15 

67.70 

85.66 

104.02 

122.78 

141.91 

161.41 

181.24 

201.40 

221.88 

45 

16.99 

34.41 

52.25 

70.51 

89.18 

108.25 

127.69 

147.51 

167.67 

188.17 

208.98 

230.07 

46 

17.72 

35.87 

54.44 

73.43 

92.83 

112.61 

132.77 

153.28 

174.14 

195.31 

216.76 

238.47 

47 

18.47 

37.38 

56.71 

76.46 

96.60 

117.12 

138.00 

159  .  23 

180.79 

202.62 

224.73 

247.09 

48 

19.26 

38.96 

59.08 

79.60 

100.51 

121.79 

143.42 

165.37 

187.62 

210.15 

232.92 

255.91 

49 

20.08 

40.60 

61.51 

82.84 

104.53 

126.58 

148.97 

171.66 

194.62 

217.85 

241.29 

264.91 

50 

20.93 

42.28 

64.04 

86.18 

108.68 

131.53 

154.69 

178.12 

201.82 

225.74 

249.84 

274.09 

51 

21.80 

44.03 

66.64 

89.63 

112.97 

136.61 

160.55 

184.76 

209.18 

233.80 

258.57 

283.44 

52 

22.72 

45.84 

69.34 

93.19 

117.37 

141.84 

166.59 

191.56 

216.73 

242.04 

267.47 

292.97 

53 

23.65 

47.70 

72.11 

96.85 

121.89 

147.21 

172.71 

198.52 

224.42 

250.44 

276.53 

302.66 

54 

24.62 

49.63 

74.96 

100.61 

126.54 

152.71 

179.09 

205.63 

232.28 

259.00 

285.76 

312.49 

55 

25.64 

51.61 

77.91 

104.50 

131.33 

158.37 

185.58 

212.90 

240.30 

267.73 

295.14 

322.46 

56 

26.66 

53.64 

80.93 

108.47 

136.23 

164.14 

192.19 

220.31 

248.46 

276.59 

304.63 

332.54 

57 

27.73 

55.77 

84.06 

112.58 

141.26 

170.07 

198.96 

227.88 

256.78 

285.59 

314.27 

342.75 

58 

28.84 

57.94 

87.27 

116.77 

146.40 

176.12 

205.85 

235.58 

265.21 

294.71 

324.01 

353.06 

59 

29.96 

60.16 

90.53 

121.05 

151.64 

182.28 

212.88 

243.39 

273.76 

303.93 

333.84 

363.42 

60 

31.13 

62.44 

93.90 

125.44 

157.02 

188.57 

220.02 

251.33 

282.43 

313.26 

343.76 

373.86 

61 

32.32 

64.79 

97.34 

129.93 

162.49 

194.96 

227.27 

259.37 

291.20 

322.67 

353.74 

384.36 

62 

33.55 

67.19 

100.88 

134.53 

168.07 

201.47 

234.64 

267.53 

300.06 

332.16 

363.80 

394.88 

63 

34.80 

69.66 

104.47 

139.18 

173.74 

208.06 

242.09 

275.75 

308.97 

341.71 

373.87 

405.41 

64 

36.11 

72.19 

108.15 

143.95 

179.51 

214.77 

249.64 

284.06 

317.97 

351.29 

383.97 

415.94 

65 

37.42 

74.73 

111.88 

148.77 

185.35 

221.53 

257.23 

292.42 

326.99 

360.89 

394.06 

426.44 

66 

38.76 

77.35 

115.67 

153.67 

191.26 

228.36 

264.91 

300.82 

336.04 

370.50 

404.14 

436.91 

67 

40.14 

80.01 

119.55 

158.65 

197.24 

235.27 

272.63 

309.27 

345.12 

380.12 

414.21 

447.32 

68 

41.54 

82.72 

123.46 

163.67 

203.28 

242.21 

280.38 

317.73 

354.19 

389.71 

424.20 

457.64 

69 

42.97 

85.47 

127.42 

168.76 

209.37 

249.20 

288.16 

326.20 

363.26 

399.25 

434.14 

467.87 

70 

44.41 

88.24 

131.43 

173.87 

215.48 

256.20 

295.95 

334.67 

372.28 

408.73 

443.97 

477.96 

TABLE  XVII.— Continued. 

FRATERNAL  CONGRESS  EXPERIENCE,  FOUR  PER  CENT— WHOLE  LIFE 
POLICY  FOR  $1000.— Continued. 


Age. 

Net  Reserve  at  End  of  Year. 

13 

fi 

15 

*9 

17 

18 

19 

20 

21 

22 

23 

* 

20 

95.05 

04.35 

13.95 

23.87 

34.12 

44.69 

55.57166.78 

78.31 

90.17 

$ 
202.33 

$ 
214.81 

21 

99.13 

08.80 

118.78 

29.08 

139.71 

50.6)6 

161.93 

173.53 

185.45 

197.69 

210.24 

223.11 

22 

03.38 

13.43 

123.79 

134.49 

145.50 

56.84 

168.51 

180.51 

192.82 

205.44 

218.39 

231.6)7 

23 

07.79 

18.22 

128.99 

140.07 

151.48 

63.23 

175.30 

187.69 

200.39 

213.42 

226.79 

240.49 

24 

12.35 

23.18 

134.34 

145.83 

157.65 

169.81 

182.28 

195.07 

208.18 

221.64 

235.43 

249.56 

25 

17.08 

28.32 

139.89 

151.79 

164.03 

176.59 

189.47 

202.67 

216.22 

230.11 

244.34 

258.89 

26 

21.97 

133.62 

145.62 

157.94 

170.59 

83.56 

196.87 

210.51 

224.50 

238.83 

253.49 

268.48 

27 

27.03 

39.12 

151.53 

164.28 

177.35 

190.76 

204.51 

218.60 

233.04 

247.81 

262.92 

278.35 

28 

32.26 

144.78 

157.62 

170.80 

184.31 

198.17 

212.38 

226.94 

241.82 

257,05 

272!  61 

288.47 

29 

37.66 

150.61 

163.90 

177.52 

191.50 

205.83 

220.50 

235.51 

250.87 

266.55 

282.54 

298.85 

30 

43.23 

156.63 

170.37 

184.47 

198.92 

213.72 

228.86 

244.35 

260.17 

276.30 

292.75 

309.47 

31 

48.95 

162.82 

177.05 

191.63 

206.56 

221.85 

237.47 

253.44 

269.72 

286.31 

303.19 

320.35 

32 

154.87 

169.23 

183.96 

199.03 

214.46 

230.24 

246.35 

262.79 

279.54 

296.58 

313.90 

331.49 

33 

160.97 

175.84 

191.07 

206.65 

222.58 

238.86 

255.45 

272.37 

289.58 

307.08 

324.84 

342.84 

34 

167.30 

182.68 

198.42 

214.52 

230.97 

247.74 

264.83 

282.22 

299.89 

317.84 

336.03 

354.44 

35 

173.82 

189.73 

206.00 

222.63 

239.58 

256.85 

274.43 

292.30 

310.44 

328.83 

347.43 

366.25 

36 

180.55 

197.01 

213.82 

230.96 

248.44 

266.21 

284.28 

302.63 

321  22 

340.04 

359.07 

378.28 

37 

187.49 

204.51 

221.85 

239.53 

257.52 

275.80 

294.37 

313  .  18 

332.22 

351.48 

370.93 

390.49 

38 

194.70 

212.25 

230.15 

248.36 

266.87 

285.66 

304.71 

323.98 

343.48 

363.15 

382.98 

402.92 

39 

202.09 

220.22 

238.66 

257.42 

276.45 

295.74 

315.26 

335.01 

354.94 

375.02 

395.22 

415.51 

40 

209.74 

228.43 

247.43 

266.72 

286.27 

306.06 

326.07 

346.26 

366.62 

387.09 

407.65 

428.27 

41 

217.60 

236.87 

256.43 

276.25 

296.32 

316.61 

337.09 

357.73 

378.48 

399.34 

420.35 

441  .  18 

42 

225.70 

245.55 

265.66 

286.02 

306.61 

327.39 

348.33 

36)9.39 

390.55 

411.76 

433.00 

454.22 

43 

234.05 

254.47 

275.13 

296.04 

317.13 

338.39 

359.77 

381.26 

402.79 

424.36 

445.90 

467.38 

44 

242.62 

263.62 

284.85 

306.28 

327.88 

349.60 

371.42 

393.30 

415.21 

437.10 

458.91 

480.64 

45 

251.41 

273.00 

294.78 

316.74 

338.82 

301.01 

383.25 

405.52 

427.77 

449.95 

472.03 

493.96 

46 

260.44 

282.59 

304.93 

327.40 

349.96 

372.59 

395.24 

417.88 

440.44 

462.90 

485.21 

507.33 

47 

269.65 

292.39 

315.26 

338.23 

361.27 

384.33 

407.37 

430.34 

453.21 

475.92 

498.44 

520.72 

48 

279.07 

302.37 

325.78 

349.25 

372.75 

396.22 

419.62 

442.92 

466.06 

489.01 

511.70 

534.10 

49 

288.66 

312.53 

336.46 

360.42 

384.36 

408.22 

431.98 

455.57 

478.97 

502.10 

524.94 

547.45 

50 

298.44 

322.86 

347.31 

371.74 

396.09 

420.33 

444.41 

468.29 

491.90 

515.21 

538.17 

560.74 

51 

308.39 

333.36 

358.31 

383.18 

407.94 

432.53 

456.92 

481.04 

504.84 

528.30 

551.34 

573.94 

52 

318.50 

344.01 

369.43 

394.75 

419.89 

444.82 

469.47 

493.81 

517.79 

541.34 

564.45 

587.05 

53 

328.76 

354.77 

380.67 

406.40 

431.91 

457.14 

482.04 

506.57 

530.68 

554.32 

577.45 

600.03 

54 

339.14 

365.67 

392.01 

418.14 

443.98 

469.49 

494.62 

519.31 

543.52 

567.21 

590.34 

612.88 

55 

349.65 

376.67 

403.45 

429.95 

456.09 

481.86 

507.17 

532.00 

556.29 

580.00 

603.10 

625.53 

56 

360.26 

387.76 

414.95 

441.78 

468.23 

494.21 

519.68 

544.61 

568.95 

592.66 

615.68 

638.00 

57 

370.  9S 

398.93 

426.50 

453.66 

480.36 

506.53 

532.14 

557.15 

581.50 

605.16) 

628.09 

650.26 

58 

381.  7S 

410.14 

438.09 

465.54 

492.46 

518.80 

544.52 

569.57 

593.90 

617.48 

640.28 

662.27 

59 

392.62 

421.39 

449.66 

477.38 

504.51 

530.99 

556.78 

581.83 

606.12 

629.60 

652.23 

674.02 

60 

403.52 

432.67 

461.24 

489.21 

516.50 

543.09 

568.92 

593.95 

618.16 

641.49 

663.95 

685.51 

61 

414.44 

443.93 

472.79 

500.9" 

528.41 

555.07 

580.90 

605.89 

629.97 

653.15 

675.41 

696.71 

62 

425.36 

455.19 

484.30 

512.66 

540.21 

566.91 

592.73 

617.62 

641.57 

664.57 

686.58 

707.61 

63 

436.2 

466.40 

495.74 

524.24 

551.87 

578.58 

604.34 

629.12 

652.92 

675.70 

697.46 

718.21 

64 

447.1 

477.56 

507.09 

535.71 

563.39 

590.07 

615.75 

640.41 

664.01 

686.55 

708.05 

728.47 

65 

457.  9C 

488.62 

518.32 

547.03 

574.72 

601.35 

626.94 

651.42 

674.81 

697.11 

718.29 

738.40 

66 

468.74 

499.59 

529.42 

558.18 

585.85 

612.43 

637.86 

662.17 

685.33 

707.34 

728.23 

747.96 

67 

479.4 

510.45 

540.37 

569.16 

596.80 

623.26 

648.54 

672.65 

695.54 

717.27 

737.80 

757.24 

68 

489.9 

521.14 

551.14 

579.94 

607.51 

633.84 

658.95 

682.81 

705.45 

726.83 

747.08 

766.04 

69 

sqo*.  as 

531.68 

561.74 

590.56 

617.98 

644.17 

669.06 

692.68 

714.99 

736.12 

755.90 

774.63 

70 

510.66 

542.06 

572.11 

600.82 

628.20 

654.20 

678.88 

702.19 

724.27 

744.94 

764.51 

782.20 

TABLE  XVII.— Continued. 

FRATERNAL  CONGRESS  EXPERIENCE,  FOUR  PER  CENT— WHOLE  LIFE 
POLICY  FOR  $1000.— Continued. 


Age. 

Net  Reserve  at  End  of  Year. 

25 

26 

27 

<j)O 
6O 

29 

30 

31 

32 

33 

34 

35 

36 

20 

227.60 

240.73 

254.18 

267.96 

282.06 

296.48 

111.21 

326  .  23 

% 
341.54 

$ 

357.11 

% 
372.94 

$ 
389.02 

21 

236.31 

249.84 

263.70 

277.88 

292.39 

307.20 

322.31 

337.70 

353.37 

369.29 

385.46 

401.85 

22 

245.29 

259.23 

273.50 

288.09 

302.99 

318.19 

333.68 

349.44 

365.47381.73 

398.21 

414.90 

23 

254.52 

268.88 

283.56 

298.56 

313.86 

329.45 

345.31 

361.43 

377.80 

394.39 

411.18 

428.16 

24 

264.01 

278.79 

293.89 

309.29 

324.98 

340.95 

357.18 

373.66 

390.35 

407.26 

424.35 

441.60 

25 

273.77 

288.98 

304.48 

320.28 

336.36 

352.71 

369.30 

386.11 

403.13 

420.34 

437.71 

455.22 

26 

283.80 

299.42 

315.33 

331.53 

347.99 

364.70 

381.64 

398.78 

416.12 

433.62 

451.25 

468.99 

27 

294.09 

310.12 

326.44 

343.03 

359.87 

376.94 

394.21 

411.68 

429.31 

447.07 

464.95 

482.90 

28 

304.63 

321.08 

337.80 

354.78 

371.98 

389.39 

407.00 

424.76 

442.67 

460.69 

478.78 

496.92 

29 

315.43 

332.29 

349.41 

366.75 

384.30 

402.06 

419.98 

438.03 

456.20 

474.44 

492.74 

511.05 

30 

326.48 

343.75 

361.24 

378.95 

396.86 

414.93 

433.15 

451.47 

469.87 

488.32 

506.80 

525.26 

31 

337.77 

355.43 

373.30 

391.37 

409.61 

427.99 

446.48 

465.05 

483.67 

502.31 

520.94 

539.51 

32 

349.31 

367.35 

385.59 

404.00 

422.56 

441.22 

459.97 

478.77 

497.59 

516.39 

535.14 

553.80 

33 

361.06 

379.48 

398.08 

416.82 

435.66 

454.60 

473.58 

492.59 

511.58 

530.51 

549.36 

568.08 

34 

373.05 

391.84 

410.72 

429.81 

448.95 

468.13 

487.33 

506.52 

525.65 

544.69 

563.60 

582.35 

35 

385.24 

404.38 

423.63 

442.97 

462.36 

481.77 

501  .  17 

520.50 

539.75 

558.87 

577.82 

596.57 

36 

397.63 

417.10 

436.66 

456.27 

475.90 

495.52 

515.07 

534.53 

553.87 

573.04 

592.00 

610.72 

37 

410.19 

429.98 

449.82 

469.69 

489.54 

509.32 

529.02 

548.58 

567.98 

587.17 

606.10 

624.76 

38 

422.95 

443.04 

463.15 

483.24 

503.27 

523.21 

543.02 

562.65 

582.08 

601.25 

620.14 

638.69 

39 

435.86 

456.23 

476.58 

496.86 

517.06 

537.12 

557.01 

576.69 

596.10 

615.24 

634.03 

652.47 

40 

448.91 

469.54 

490.10 

510.57 

530.90 

551.06 

570.99 

590.67 

610.06 

629.11 

647.80 

666.08 

41 

462.09 

482.94 

503.70 

524.31 

544.76 

564.97 

584.93 

604.59 

623.91 

642.85 

661.39 

679.49 

42 

475.38 

496.44 

517.35 

538.10 

558.61 

578.85 

598.80 

618.41 

637.63 

656.44 

674.80 

692.68 

43 

488.76 

509.99 

531.05 

551.88 

572.43 

592.69 

612.59 

632.10 

651.20 

669.84 

687.99 

705.63 

44 

502.21 

523.60 

544.76 

565.64 

586.21 

606.43 

626.25 

645.65 

664.59 

683.04 

700.95 

718.32 

45 

515.71 

537.21 

558.44 

579.36 

599.91 

620.06 

639.78 

659.03 

677.78 

696.00 

713.65 

730.72 

46 

529.21 

550.81 

572.09 

592.99 

613.49 

633.56 

653.14 

672.21 

690.74 

708.70 

726.06 

742.81 

47 

542.70 

564.36 

585.65 

606.52 

626.94 

646.88 

666.30 

685.16 

703.44 

721.12 

738.17 

754.57 

48 

556.17 

577.85 

599.12 

619.92 

640.23 

660.02 

679.24 

697.86 

715.87 

733.24 

749.95 

765.99 

49 

569.56 

591.24 

612.45 

633.17 

653.34 

672.93 

691.93 

710.29 

728.00 

745.03 

761.40 

777.05 

50 

582.86 

604.51 

625.65 

646.24 

666.23 

685.61 

704.35 

722.42 

739.81 

756.51 

772.49 

787.75 

51 

596.06 

617.64 

638.67 

659.09 

678.89 

698.03 

716.49 

734.25 

751.30 

767.62 

783.21 

798.08 

52 

609.12 

630.62 

651.50 

671.74 

691.30 

710.17 

728.32 

745.76 

762.44 

778.38 

793.58 

808.02 

53 

622.03 

643.39 

664.10 

684.13 

703.43 

722.01 

739.85 

756.92 

773.23 

788.78 

803.55 

817.58 

54 

634.75 

655.96 

676.47 

696.24 

715.27 

733.54 

751.03 

767.74 

783.66 

798.79 

813.16 

826.72 

55 

647.28 

668.31 

688.58 

708.08 

726.82 

744.74 

761.87 

778.20 

793.71 

808.44 

822.35 

835.57 

56 

659.58 

680.38 

700.40 

719.63 

738.03 

755.61 

772.37 

788.29 

803.40 

817.67 

831.19 

843.82 

57 

671.63 

692.20 

711.95 

730.85 

748.91 

766.13 

782.49 

798.02 

812.68 

826.57 

839.57 

S51.84 

58 

683.42 

703.74 

723.18 

741.75 

759.46 

776.29 

792.26 

807.34 

821.62 

834.99 

847.65 

859  .  10 

59 

694.94 

714.96 

734.08 

752.32 

769  .  64 

786.08 

801.61 

816.32 

830.09 

843.12 

854.91 

865.71 

60 

706.15 

725.87 

744.67 

762.53 

779.48 

795.49 

810.65 

824.84 

838.28 

850.43 

861.57 

872.14 

61 

717.06 

736.46 

754.90 

772.39 

788.91 

804.56 

819.21 

833.08 

845.62 

857.12 

868.03 

880.86 

62 

727.66 

746.71 

764.79 

781.86 

798.04 

813.18 

827.51 

840.47 

852.35 

863.62 

876.88 

904.44 

63 

737.91 

756.62 

774.29 

791.03 

806.69 

821.52 

834.93 

847.22 

858.88 

872.60 

901  .  12 

64 

747.85 

766.15 

783.49 

799.72 

815.08 

828.98 

841.71 

853.80 

868.01 

897.56 

65 

757.39 

775.38 

792.22 

808.15 

822.57 

835.78 

848.32 

863.06 

893.72 

66 

766.65 

784.14 

800.69 

S  15.67 

829.40 

842.42 

857.74 

889.59 

67 

775.43 

792.  6f 

808.24 

822.52 

836.07 

852.00 

885.14 

68 

783.99 

800.22 

815.10 

829.21 

845.81 

880.33 

69 

791.  5f 

807.08 

821.81 

839.13 

875.15 

70 

798.42 

813.81 

831.91 

869.54 

TABLE  XVII.— Continued. 

FRATERNAL  CONGRESS  EXPERIENCE,  FOUR  PER  CENT— WHOLE  LIFE 
POLICY  FOR  $1000.— Continued. 


Net  Reserve  at  End  of  Year. 

Age. 

37 

38 

39 

40 

41 

42 

43 

44 

45 

46 

47 

48 

20 

$ 
405.31 

% 
421.79 

$ 
438.47 

$ 
455.29 

$ 
472.25 

489.31 

506.44 

523.62 

540.82 

558.01 

57.5.14 

592.20 

21 

418.43 

435.20 

452.12 

469.18 

486.34 

503.  .57 

520.85 

538.15 

555  .  44 

572.67 

589.82 

606.86 

22 

431.77 

448.80 

465.96 

483.22 

500.56 

517.94 

535.35 

552.74 

570.07 

5S7.33 

604.47 

621.47 

23 

445.29 

462.56 

479.93 

497.38 

514.88 

.532.39 

549.89 

567.34 

584.71 

(501.93 

619.06 

63.5.98 

24 

458.98 

476.47 

494.03 

511.65 

529.28 

546.90 

564.46 

581.94 

599.31 

616.53 

633.56 

650.36 

25 

472.83 

490.51 

508.25 

526.00 

.543.74 

561.43 

579.03 

596.52 

61,3.86 

631.01 

647.93 

664.61 

26 

486.80 

504.67 

522.55 

540.42 

.558.23 

575  .  97 

593.58 

611.05 

628.32 

645.37 

662.17 

678  .  67 

27 

500.90 

518.92 

536.92 

554.87 

572.74 

590.49 

608.09 

625.49 

642.67 

659.60 

676.23 

692.54 

28 

515.09 

533.24 

551.33 

569.34 

587.23 

604.97 

622.51 

639.82 

656  .  89 

673.65 

690.09 

706.17 

29 

529.35 

547.59 

565.76 

583.79 

601.68 

619.37 

636.83 

654.03 

670.93 

687.51 

703.73 

719.56 

30 

543.66 

561.98 

580.17 

598.21 

616.06 

633.67 

651.02 

668.07 

684.79 

701.15 

717.12 

732.68 

31 

557.99 

576.35 

594.56 

612.56 

630.33 

647.85 

665.05 

681.92 

698.43 

714.55 

730.25 

745.49 

32 

572.33 

590.71 

608.89 

626.83 

644.50 

661.87 

678.90 

695.57 

711.84 

727.69 

743.08 

758.00 

33 

586.64 

605.00 

623.11 

640.97 

658.51 

675.71 

692.54 

708  .  97 

724.98 

740.52 

755.59 

770.10 

34 

600.90 

619.21 

637.25 

654.97 

672.35 

689.35 

705.96 

722.13 

737.83 

753.06 

767.78 

781.97 

35 

615.08 

633.31 

651.23 

668.79 

685.99 

702.77 

719.11 

734.99 

750.38 

76.5.26 

779.61 

793.41 

36 

629.16 

647.28 

665.04 

682.43 

699.40 

715.93 

731.99 

747.55 

762.60 

777.11 

791.07 

804.48 

37 

643.10 

661.07 

678.66 

695.84 

712.56 

728.81 

744.56 

759.79 

774.47 

788.59 

802.16 

815.14 

38 

656.89 

674.70 

692.09 

709.02 

725.47 

741.41 

756.82 

771.69 

785.99 

799.72 

812.86 

825.42 

39 

670.51 

688.11 

705.27 

721.92 

738.07 

753.69 

768.74 

783.23 

797.14 

810.45 

823.17 

835.30 

40 

683.92 

701.30 

718.19 

734.55 

750.38 

765.63 

780.31 

794.41 

807.90 

820.79 

833.08 

844.75 

41 

697.11 

714.23 

730.83 

746.87 

762.34 

777.23 

791.52 

805  .  21 

818.28 

830.74 

842.58 

853.81 

42 

710.05 

726.89 

743.17 

758.87 

773.97 

788.47 

802.36 

815.62 

828.26 

840.27 

851.68 

862.44 

43 

722.72 

739.25 

755.19 

770.52 

785.25 

799.34 

812.81 

825.64 

8.37.84 

849.41 

860.34 

870.70 

44 

735.11 

751.30 

766.88 

781.84 

796.15 

809.83 

822.87 

835.26 

847.02 

858.13 

868.64 

878.49 

45 

747.18 

763.01 

778.22 

792.77 

806.68 

819.94 

832.53 

844.48 

855.77 

866.47 

876.48 

885.95 

46 

758.92 

774.39 

789.19 

803.34 

816.83 

829.64 

841.80 

853.28 

864.16 

874.34 

883.98 

S92.70 

47 

770.32 

785.39 

799.79 

813.52 

826.56 

838.94 

850.63 

861.71 

872.07 

881.89 

890.76 

898.90 

48 

781.35 

796.02 

810.01 

823.30 

835.91 

847.82 

859.11 

869.67 

879.66 

888.72 

896.99 

904.86 

49 

792.01 

806.28 

819.83 

832.69 

844.83 

856.34 

867.11 

877.30 

886.52 

894.99 

902.99 

912.42 

50 

802.31 

816.13 

829.26 

841.65 

853.39 

864.38 

874.78 

884.19 

892  .  82 

901.00 

910.62 

930.63 

51 

812.20 

825.61 

838.27 

850.26 

861.48 

872.11 

881.72 

890.53 

898.88 

908.71 

929.15 

52 

821.72 

834.66 

846.92 

858.40 

869.26 

879.08 

888.09 

896.63 

906.68 

927.57 

53 

830.82 

843.36 

855.10 

866.22 

876.27 

885.48 

894.23 

904.51 

925.89 

54 

839.57 

851.59 

862.98 

873.27 

882.71 

891.66 

902.19 

924.09 

55 

847.85 

859.52 

870.07 

879.75 

888.93 

899.73 

922.18 

56 

855.82 

866.65 

876.58 

886.01 

897.09 

920.13 

57 

863.00 

873.20 

882.88 

894.27 

917.94 

58 

869.59 

879.54 

891.25 

915.60 

59 

875.97 

888.02 

913.09 

60 

884.57 

910.41 

Net  Reserve  at  End  of  Year. 

61 

907.53 

Age. 

49 

50 

51 

52 

53 

54 

55 

56 

57 

58 

59 

60 

20 

609.13 

625.93 

642.54 

658.94 

675.10 

690.97 

706.54 

721.77 

736.64 

751  .  12 

765.19 

778.82 

21 

623.75 

640.46 

656.95 

673.21 

689.17 

704.83 

720.1.5 

735.10 

749.67 

763.82 

777.54 

790.  SO 

22 

638.28 

654.87 

671.22 

687.28 

703.04 

718.45 

733.50 

748.15 

762.39 

776.18 

789.53 

802.39 

23 

652.68 

669.13 

685.30 

701  .  15 

716.66 

731.80 

746.55 

760.88 

774.76 

788.19 

801  .  13 

813.59 

24 

666.93 

683.20 

699.16 

714.77 

730.01 

744.86 

759.28 

773.26 

786.78 

799.81 

812.35 

824.39 

25 

681.00 

697.06 

712.79 

728.14 

743.09 

757.61 

771.69 

785.29 

798.42 

811.04 

823.17 

834.77 

TABLE  XVII.— Continued. 

FRATERNAL  CONGRESS  EXPERIENCE,  FOUR  PER  CENT- 
POLICY  FOR  $1000.— Continued. 


-WHOLE  LIFE 


A 

Net  Reserve  at  End  of  Year. 

Aye. 

49 

50 

51 

52 

53 

54 

55 

56 

57 

58 

59 

60 

% 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

26 

694.86 

710.70 

726.16 

741.22 

755.84 

770.02 

783.72 

796.95 

809.67 

821.88 

833.57 

844.74 

27 

708.49 

724  .  07 

739.25 

753.99 

768.27 

782.09 

795.40 

808.23 

820.53 

832.30 

843.56 

854.28 

28 

721.88 

737.17 

752.03 

766.43 

780.35 

793.78 

806.69 

819.10 

830.97 

842.31 

853.13 

863.40 

29 

734.98 

749.96 

764.48 

778.52 

792  .  06 

805.08 

817.59 

829.56 

841.00 

851.90 

862.26 

872.09 

30 

747.79 

762.43 

776.60 

790.25 

803.39 

816.00 

828.08 

839.62 

850.61 

861.06 

870.98 

880.35 

31 

760.27 

774.56 

788.34 

SOI.  60 

814.33 

826.52 

838.16 

849.25 

859.  80  '869.  80 

879.26 

888.21 

32 

772.42 

786.33 

799.72 

S12.57 

824.87 

836.62 

847.82 

858.47 

868.57878.11 

887.15 

895.61 

33 

784.21 

797.72 

S10.70 

823.13 

835.00 

846.31 

857.06 

867.26 

876.90886.03 

894.57 

902.66 

34 

795.63 

SOS.  74 

821.29 

833.29 

844.72 

855.58 

865.89 

875.62 

884.84 

893.48 

901.65 

909.04 

35 

806.67 

SI  9.  35 

831.48 

843.03 

854.01 

864.43 

874.27 

883.60 

S92.32 

900.58 

908.05 

914.90 

36 
37 

817.31 

827.55 

829.57 
S39.37 

841.25 
850.61 

852.36 
S61.27 

862.90 
871.34 

S72.S5 
880.88 

882.28 
889.81 

891  .  10 

898.26 

899.45907.01 
905.91  912.91 

913.93920.50 
919.56927.38 

38 

837.39 

848.77 

859.56 

869.76 

879.41 

8SS.45 

897.01904.75 

911.84918.57 

926  .  49  942  .  94 

39 

846.81 

857.75 

868.08 

877.86 

887.01 

895.68 

903.52 

910.70 

917.52 

925.54 

942.21 

40 

855.84 

S66.30 

876.22 

885.49 

894.28 

902.22 

909.50 

916.41 

924.54 

941.43 

41 

864.43 

874.48 

883.89 

892  .  79 

900.85 

908.23 

915.24923.48 

940.61 

42 

872.64 

882.19 

891  .  22 

S99.40 

906.89 

914.00 

922.36 

939.74 

43 

880.39 

889  .  56 

897.86 

905.47 

912.69 

921.17 

938.82 

44 

887.81 

896.24 

903.97 

911.30 

919.92 

937.85 

4.1 

894.52 

902.38 

909.83 

918.59 

936.82 

46 

900.69 

908.27 

917.19 

935.73 

47 

)06.61 

915.69 

934.57 

48 

914.11 

933.34 

Net  Reserve  at  End  of  Year. 

.49 

932.03 

A(jc. 

61 

62 

63 

f>7f 

65 

66 

67 

68 

69 

70 

71 

72 

$ 

% 

% 

$ 

$ 

$ 

$ 

$ 

$ 

$           |$ 

$ 

20 

792.01 

804.72 

816.95 

828.70 

839.94 

850.68 

860.92 

870.65 

879.88 

888.60896.86 

904.59 

21 

803.58 

815.89 

827.70 

S39.00 

849.81 

860.11 

869.89 

879.18 

887.95 

896.  261904.04 

911.40 

22 

814.77 

826.66 

S3S.03 

848.91 

859.26 

869.10 

878.45 

887.27 

895.63 

903.45910.86 

917.56 

23 

825.55 

S37.00 

847  .  94 

858.37 

868.27 

S77.67 

886.55 

894.97 

902.84 

910.29,917.03 

923.21 

24 

835.92 

846.93 

857.42 

867.39 

876.86 

885.80 

894.27 

902.19 

909.69 

916.48 

922.70 

928.60 

25 

845.86 

856.43 

866.47 

876.00 

885.00 

893.53 

901.51 

909.07 

915.90 

922.16 

928.10 

935.09 

26 

855.39 

865.50 

875  .  10 

884.17 

892.76 

900.79 

908.40 

915.29 

921.59 

927.58934.62 

949.26 

27 

864.48 

874.15 

883.29 

891.94 

900.04 

907.71 

914.64 

921.00 

927.03 

934.12948.87 

28 

873.15 

882.36 

891.08 

899.24 

906.97 

913.96 

920.37 

926.45 

933.60 

948  .  46 

29 

881.38 

890.17 

898.41 

906.20 

913.25 

919.71 

925.84 

933.05 

948.04 

30 

889.22 

897.52 

905.38 

912.49 

919.01 

925.19 

932.46 

947.58 

31 

896.59 

904.52 

911.69 

918.27 

924.51 

931.85 

947.11 

32 

903.61 

910.86 

917.50 

923.79 

931.20 

946.60 

33 

909.97 

916.67 

923.04 

930.52 

946.07 

34 

915.81 

922.24 

929.80 

945.51 

35 
36 
37 

921  .39 
928.23 
943.64 

929  .  04 
944.30 

944  .  92 

Net  Reserve  at  End  of  Year. 

Age. 

73 

u 

75 

76 

77 

78 

20 

$ 
911.91 

$ 

918.53 

$ 
924.60 

$ 
930.35 

$ 
937.12 

$ 
951.20 

21 

918.05 

924.16 

929.95 

936.76 

950.92 

22 

923.70 

929  .  52 

936.37 

950.62 

23 

929.07 

935.97 

950.30 

24 

935.54 

949  .  97 

25 

949.62 

334 


TABLE  XVIII. 
AMERICAN  EXPERIENCE  MORTALITY  TABLE. 


X 

lx 

dx 

1000  qK 

ex 

X 

lx 

d* 

1000  qx 

ex 

10 

100,000 

749 

7.490 

48.72 

53 

66,797 

1,091 

16.333 

18.79 

11 

99,251 

746 

7.516 

48.08 

54 

65,706 

1,143 

17.396 

18.09 

12 

98,505 

743 

7.543 

47.45 

55 

64,563 

1,199 

18.571 

17.40 

13 

97,762 

740 

7.569 

46.80 

56 

63,364 

1,260 

19.885 

16.72 

14 

97,022 

737 

7.596 

46.16 

57 

62,104 

1,325 

21.335 

16.05 

15 

96,285 

735 

7.634 

45.50 

58 

60,779 

1,394 

22.936 

15.39 

16 

95,550 

732 

7.661 

44.85 

59 

59,385 

1,468 

24.720 

14.74 

17 

94,818 

729 

7.688 

44.19 

60 

57,917 

1,546 

26.693 

14.10 

18 

94,089 

727 

7.727 

43.53 

61 

56,371 

1,628 

28.880 

13.47 

19 

93,362 

725 

7.765 

42.87 

62 

54,743 

1,713 

31.292 

12.86 

20 

92,637 

723 

7.805 

42.20 

63 

53,030 

1,SOO 

33.943 

12.26 

21 

91,914 

722 

7.855 

41  .53 

64 

51,230 

1,889 

36.873 

11.67 

22 

91,192 

721 

7.906 

40.85 

65 

49,341 

1,980 

40.129 

11.10 

23 

90,471 

720 

7.958 

40.17 

66 

47,361 

2,070 

43.707 

10.54 

24 

89,751 

719 

8.011 

39.49 

67 

45,291 

2,158 

47.647 

10.00 

25 

89,032 

718 

8.065 

38.81 

68 

43,133 

2,243 

52.002 

9.47 

26 

88,314 

718 

8.130 

38.12 

69 

40,890 

2,321 

56.762 

8.97 

27 

87,596 

718 

8.197 

37.43 

70 

38,569 

2,391 

61.993 

'  8.48 

28 

86,878 

718 

8.264 

36.73 

71 

36,178 

2,448 

67.665 

8.00 

29 

86,160 

719 

8.345 

36.03 

72 

33,730 

2,487 

73.733 

7.55 

30 

85,441 

720 

8.427 

35.33 

73 

31,243 

2,505 

80.178 

7.11 

31 

84,721 

721 

8.510 

34.63 

74 

28,738 

2,501 

87.028 

6.68 

32 

84,000 

723 

8.607 

33.92 

75 

26,237 

2,476 

94.371 

6.27 

33 

83,277 

726 

8.718 

33.21 

76 

23,761 

2,431 

102.311 

5.88 

34 

82,551 

729 

8.831 

32.50 

77 

21,330 

2,369 

111.064 

5.49 

35 

81,822 

732 

8.946 

31.78 

78 

18,961 

2,291 

120.827 

5.11 

36 

81,090 

737 

9.089 

31.07 

79 

16,670 

2,196 

131.734 

4.74 

37 

80,353 

742 

9.234 

30.35 

80 

14,474 

2,091 

144.466 

4.39 

38 

79,611 

749 

9.408 

29.62 

81 

12,383 

1,964 

158.605 

4.05 

39 

78,862 

756 

9.586 

28.90 

82 

10,419 

1,816 

174.297 

3.71 

40 

78,106 

765 

9.794 

28.18 

83 

8,603 

1,648 

191.561 

3.39 

41 

77,341 

774 

10.008 

27.45 

84 

6,955 

1,470 

211.359 

3.08 

42 

76,567 

785 

10.252 

26.72 

85 

5,485 

1,292 

235.552 

2.77 

43 

75,782 

797 

10.517 

26.00 

86 

4,193 

1,114 

265.681 

2.47 

44 

74,985 

812 

10.829 

25.27 

87 

3,079 

933 

303.020 

2.18 

45 

74,173 

828 

11.163 

24.54 

88 

2,146 

744 

346.692 

1.91 

46 

73,345 

848 

11.562 

23.81 

89 

1,402 

555 

395.863 

1.66 

47 

72,497 

870 

12.000 

23.08 

90 

847 

385 

454.545 

1.42 

48 

71,627 

896 

12.509 

22.36 

91 

462 

246 

532.466 

1.19 

49 

70,731 

927 

13.106 

21.63 

92 

216 

137 

634.259 

.98 

50 

69,804 

962 

13.781 

20.91 

93 

79 

58 

734.177 

.80 

51 

68,842 

1,001 

14.541 

20.20 

94 

21 

18 

857.143 

.64 

52 

67,841 

1,044 

15.389 

19.49 

95 

3 

3 

1000.000 

.50 

335 


TABLE  XIX. 

AMERICAN  EXPERIENCE— FOUR  PER  CENT. 
Commutation  Columns. 


X 

D* 

Nx 

Mx 

Rx 

10 

6755.641 

137908.321 

1451.4759 

42004.234 

11 

8447.156 

131152.680 

1402.8223 

40552.758 

12 

6152.593 

124705.524 

1356.2274 

39149.936 

13 

5871.333 

118552.931 

1311.6047 

37793.709 

14 

5602.778 

112681.598 

1268.8716 

36482.104 

15 

5346.364 

107078.820 

1227.9486 

35213.232 

16 

5101.492 

101732.456 

1188.7063 

33985.283 

17 

4867.702 

96630.964 

1151.1274 

32796.577 

18 

4644.497 

91763.262 

1115.1419 

31645.449 

19 

4431.356 

87118.765 

1080.6354 

30530.307 

20 

4227.832 

82687.409 

1047.5473 

29449.672 

21 

4033.496 

78459.577 

1015.8196 

28402.125 

22 

3847.894 

74426.081 

985.3544 

27386.305 

23 

3670.647 

70578.187 

956.1015 

26400.951 

24 

3501.380 

66907.540 

928.0128 

25444.849 

25 

3339.739 

63406.160 

901.0419 

24516.836 

26 

3185.391 

60066.421 

875.1444 

23615.794 

27 

3037.974 

56881.030 

850.2430 

22740.650 

28 

2897.185 

53843.056 

826.2993 

21890.407 

29 

2762.733 

50945.871 

803.2765 

21064.108 

30 

2634.305 

48183.138 

781  .  1084 

20260.831 

31 

2511.641 

45548.833 

759.7633   . 

19479.723 

32 

2394.487 

43037.192 

739.2106 

18719.961 

33 

2282.574 

40642.705 

719.3936 

17980.750 

34 

2175.649 

38360.131 

700.2597 

17261.356 

35 

2073.496 

36184.482 

681.7857 

16561.096 

36 

1975.910 

34110.986 

663.9491 

15879.310 

37 

1882.645 

32135.076 

646.6814 

15215.361 

38 

1793.520 

30252.431 

629.9652 

14568.680 

39 

1708.314 

28458.911 

613.7403 

13938.715 

40 

1626.862 

26750.597 

597.9936 

13324.975 

41 

1548.970 

25123.735 

582.6723 

12726.981 

42 

1474.492 

23574.765 

567.7670 

12144.308 

43 

1403.242 

22100.273 

553.2313 

11576.541 

44 

1335.081 

20697.031 

539.0410 

11023.310 

45 

1269.830 

19361.950 

525.1397 

10484.269 

46 

1207.360 

18092.120 

511.5097 

9959.1291 

47 

1147.501 

16884.760 

498.0873 

9447.6194 

48 

1090.126 

15737.259 

484.8464 

8949.5321 

49 

1035.085 

14647.133 

471.7342 

8464.6857 

50 

982.2302 

13612.048 

458.6901 

7992.9515 

51 

931.4364 

12629.817 

445.6742 

7534.2614 

52 

882.5892 

11698.381 

432.6515 

7088.5872 

53 

835.5838 

10815.792 

419.5918 

6655.9357 

54 

790.3230 

9980.2079 

406.4691 

6236.3439 

336 


TABLE  XIX. 

AMERICAN  EXPERIENCE— FOUR  PER  CENT.— Continued. 
Commutation  Columns. 


X 

Dx 

Nx 

Mx 

R* 

55 

746.7065 

9189.8849 

393.2497 

5829.8748 

56 

704.6535 

8443.1784 

379.9160 

5436.6251 

57 

664.0783 

7738  .  5249 

366.442S 

5056.7091 

58 

624.9134 

7074.4466 

352.8195 

4690.2663 

59 

587.0969 

6449.5332 

339.0380 

4337.4468 

60 

550.5613 

5862.4363 

325.0831 

3998.4088 

61 

515.2547 

5311.8750 

310.9520 

3673.3257 

62 

481.1291 

4796.6203 

296.6437 

3362.3737 

63 

448.1477 

4315.4912 

282.1674 

3065.7300 

64 

416.2850 

3867.3435 

267.5410 

2783.5626 

65 

385.5146 

3451.0585 

252.7817 

2516.0216 

66 

355.8120 

3065.5439 

237.9064 

2263.2399 

67 

327.1735 

2709.7319 

222.9531 

2025.3335 

68 

299.6005 

2382.5584 

207.9637 

1S02.3804 

60 

273.0969 

2082.9579 

192.9831 

1594.4167 

70 

247.6878 

1809.8610 

178.0778 

1401.4336 

71 

223.3970 

1562.1732 

163.3135 

1223.3558 

72 

200.2700 

1338.7762 

148.7786 

1060.0423 

73 

178.3688 

1138.5062 

134.5801 

911.2637 

74 

157.7573 

960.1374 

120.8289 

776.6836 

75 

138.4886 

802.3801 

107.6277 

655.8547 

76 

120.5954 

663.8915 

95.0611 

548.2270 

77 

104.0936 

543.2961 

83.1975 

453.1659 

78 

88.97350 

439.2025 

72.0811 

369.9684 

79 

75.21453 

350.2290 

61.7442 

297.8873 

80 

62.79449 

275.0144 

52.2170 

236.1431 

81 

51.65655 

212.2199 

43.4942 

183.9261 

82 

41.79190 

160.5634 

35.6164 

140.4319 

83 

33.18048 

118.7715 

28.6124 

104.8155 

84 

25.79269 

85.59102 

22.5007 

76.2031 

85 

19.55883 

59.79833 

17.2589 

53.7024 

86 

14.37665 

40.23950 

12.8290 

36.4435 

87 

10.15101 

25.86285 

9.15627 

23.6145 

88 

6.802926 

15.71184 

6.19861 

14.45882 

89 

4.273472 

8.908914 

3.93081 

8.25962 

90 

2.482463 

4.635442 

2.30417 

4.32881 

91 

1.301991 

2  152979 

1.21918 

2.02464 

92 

.5853109 

.  8509883 

.552581 

.805462 

93 

.2058384 

.2656774 

.  195621 

.252881 

94 

.0526121 

.0598390 

.0503106 

.0572596 

95 

.0072269 

.0072269 

.0069490 

.0069490 

337 


TABLE  XX. 
AMERICAN  EXPERIENCE  AND  FOUR  PER  CENT. 


Single  and  Annual  Premiums  for  Whole 
Life  Insurance,  and  Whole  Life  Annuity, 
First  Payment  at  Once.                      : 

Valuation  Columns. 

X 

ax 

Ax 

Px 

kx 

Ux 

LOR.  ux 

20 

19.558 

247.774 

12.669 

7.866 

1.0482 

.0204361 

21 

19.452 

251.846 

12.947 

7.917 

1.0482 

.0204583 

22 

19.342 

256.076 

13.239 

7.969 

1.0483 

.0204806 

23 

19.228 

260.472 

13.547 

8.022 

1.0483 

.0205034 

24 

19.109 

265.042 

13.870 

8.076 

1.0484 

.0205266 

25 

18.985 

269.794 

14.211 

8.130 

1.0485 

.0205498 

26 

18.857 

274.737 

14.570 

8  .  197 

1.0485 

.0205787 

27 

18.723 

279.872 

14.948 

8.265 

1.0486 

.0206078 

28 

18.585 

285.208 

15.346 

8.333 

1.0487 

.0206374 

29 

18.440 

290.754 

15.767 

8.415 

1.0488 

.0206728 

30 

18.291 

296.514 

16.211 

8.499 

1.0488 

.0207085 

31 

18.135 

302.497 

16.680 

8.583 

1.0489 

.0207452 

32 

17.973 

308.714 

17.176 

8.682 

1.0490 

.0207875 

33 

17.806 

315.168 

17.700 

8.795 

1.0491 

.0208361 

34 

17.632 

321.862 

18.255 

8.910 

1.0493 

.0208856 

35 

17.451 

328.809 

18.842 

9.027 

.0494 

.0209361 

36 

17.263 

336.022 

19.464 

9.172 

.0495 

.0209986 

37 

17.069 

343.496 

20.124 

9.320 

.0497 

.0210623 

38 

16.868 

351.245 

20.824 

9.498 

.0499 

.0211386 

39 

16.659 

359.267 

21.566 

9.679 

.0501 

.0212168 

40 

16.443 

367.575 

22.354 

9.891 

.0503 

.0213079 

41 

16.220 

376.168 

23.192 

10.109 

.0505 

.0214016 

42 

15.988 

385.060 

24.084 

10.359 

.0508 

.0215088 

43 

15.749 

394.252 

25.033 

10.629 

.0511 

.0216250 

44 

15.502 

403.752 

26.044 

10.947 

.0514 

.0217620 

45 

15.248 

413.551 

27.122 

11.289 

1.0517 

.0219086 

46 

14.985 

423.669 

28.273 

11.697 

1.0522 

.0220838 

47 

14.714 

434.063 

29.499 

12.146 

1.0526 

.0222766 

48 

14.436 

444.762 

30.809 

12.668 

1.0532 

.0225003 

49 

14.151 

455.744 

32.207 

13.280 

1.0538 

.0227629 

50 

13.858 

466.  OSS 

33.697 

13.974 

1.0545 

.0230601 

51 

13.559 

478.481 

35.287 

14.755 

1.0553 

.0233946 

52 

13.255 

490  .  207 

36.984 

15.629 

1.0563 

.0237686 

53 

12.944 

502.154 

38.794 

16.604 

1.0573 

.0241853 

54 

12.628 

514.308 

40.728 

17.704 

1.0584 

.0246547 

55 

12.307 

526.646 

42.792 

18.922 

1.0597 

.0251744 

56 

11.982 

539.153 

44.997 

20.289 

1.0611 

.0257563 

57 

1  1  .  653 

551.  S07 

47.353 

21.800 

1.0627 

.0263994 

58 

11.321 

564.589 

49.872 

23.474 

.0644 

.0271101 

5!) 

10.985 

577  483 

52.568 

25.347 

.0663 

.0279041 

60 

10.648 

590.458 

55.452 

27.425 

.0685 

.0287837 

61 

10.309 

603.492 

58.539 

29.739 

.0709 

.0297604 

62 

9.969 

616.").")? 

61.844 

32.302 

.0736 

.0308404 

63 

9.630 

629.631 

65.385 

35.136 

.0765 

.0320305 

64 

9.290 

642.687 

69.180 

38.285 

.0798 

.0333499 

338 


TABLE  XX. 
AMERICAN  EXPERIENCE  AND  FOUR  PER  CENT.— Continued. 


Single  and  Annual  Premiums  for  Whole 
Life  Insurance,  and  Whole  Life  Annuity,                            Valuation  Columns. 
First  Payment  at  Once. 

X 

ax 

A, 

Px 

kx 

ux 

Log.  ux 

65 

8.952 

655.699 

73.248 

41.807 

.0835 

.0348203 

66 

8.616 

668.629 

77.607 

45.704 

.0875 

.0364423 

67 

8.282 

681.452 

82.279 

50.031 

.0920 

.0382356 

68 

7.952 

694.137 

87.286 

54.855 

.0970 

.    .0402259 

69 

7.627 

706.647 

92.649 

60.178 

.1026 

.0424121 

70 

7.307 

718.961 

98.393 

66.090 

.1087 

.0448271 

71 

6.993 

731.046 

104.543 

72.576 

.1155 

.0474616 

72 

6.685 

742.891 

111.130 

79.602 

.1228 

.0502970 

73 

6.383 

754.505 

118.208 

87.167 

.1307 

.0533295 

74 

6.086 

765.916 

125.845 

95.323 

.1391 

.0565756 

75 

5.794 

777.159 

134.136 

104.204 

1  .  1484 

.0600829 

76 

5.505 

788.265 

143.188 

113.971 

1.1585 

.0639071 

77 

5.219 

799.257 

153.135 

124.941 

1  .  1699 

.0681631 

78 

4.936 

810.141 

164.119 

137.433 

1  .  1829 

.0729589 

79 

4.656 

820.909 

176.296 

151.720 

1  .  1978 

.0783803 

80 

4.380 

831.554 

189.870 

168.861 

1.2156 

.0847961 

81 

4.108 

841  .988 

204.949 

188.502 

1.2332 

.0910332 

82 

3.842 

852.232 

221.821 

211.089 

1.2595 

.  1002095 

83 

3.580 

862.326 

240.904 

236.952 

1.2864 

.  1093861 

84 

3.318 

872.367 

262.887 

268.004 

1.3187 

.  1201538 

85 

3.057 

882.409 

288.618 

308.133 

1.3605 

.  1336851 

86 

2.799 

892.349 

318.816 

361.806 

1.4163 

.1511485 

87 

2.548 

902.006 

354.032 

434.762 

1.4922 

.  1738134 

88 

2.310 

911.168 

394.519 

530.070 

1.5919 

.2019150 

89 

2.085 

919.817 

441.222 

655.254 

1.7215 

.2358979 

90 

1.867 

928.179 

497.077 

833.333 

1.9067 

.2802748 

91 

1.654 

936.396 

566.277 

1138.89 

2.2244 

.3472215 

92 

1.454 

944.081 

649.340 

1734.18 

2.8435 

.4538601 

93 

1.291 

950.362 

736.310 

2761.90 

3.9124 

.5924411 

94 

1.137 

956.256 

840.766 

5999.99 

7.2800 

.8621334 

95 

1.000 

961.538 

961.538 

TABLE  XXI. 
INTEREST  TABLES,  THREE  PER  CENT. 


£ 

Amount  of  One 
Dollar  at  End 
of  n  Years. 

§S2 

5! 

gOo>g 
&** 

Amount  of  One 
Dollar  Per  An- 
num at  End  of 
n  Years. 

Present  Value 
of  One  Dollar 
Per  Annum  for 
n  Years. 

1 

Amount  of  One 
Dollar  at  End 
of  n  Years. 

HI* 
fJal 

PS! 

I-SQB 

Amount  of  One 
Dollar  Per  An- 
num at  End  of 
n  Years. 

Present  Value 
of  One  Dollar 
Per  Annum  for 
n  Years. 

(l) 

(2) 

(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

(10) 

1.0300 

.970874 

1.0300 

.9709 

51 

4.5154 

.221463 

120.6962 

25.9512 

2 

1.0609 

.942596 

2.0909 

1.9135 

52 

4.6509 

.215013 

125.3471 

26.1662 

3 

1.0927 

.915142 

3.1836 

2.8286 

53 

4.7904 

.208750 

130.1375 

26.3750 

4 

1.1255 

.888487 

4.3091 

3.7171 

54 

4.9341 

.202670 

135.0716 

26.5777 

5 

1.1593 

.862609 

5.4684 

4.5797 

55 

5.0821 

.196767 

140.1538 

26.7744 

6 

.1941 

.837484 

6.6625 

5.4172 

56 

5.2346 

.191036 

145.3884 

26.9655 

7 

1.2299 

.813092 

7.8923 

6.2303 

57 

5.3917 

.  185472 

150.7800 

27.1509 

8 

.2668 

.789409 

9.1591 

7.0197 

58 

5.5534 

.  180070 

156.3334 

27.3310 

9 

.3048 

.766417 

10.4639 

7.7861 

59 

5.7200 

.174825 

162.0534 

27.5058 

10 

.3439 

.744094 

11.8078 

8.5302 

60 

5.8916 

.  169733 

167.9450 

27.6756 

11 

1.3842 

.722421 

13.1920 

9.2526 

61 

6.0684  - 

.164789 

174.0134 

27.8404 

12 

.4258 

.701380 

14.6178 

9.9540 

62 

6.2504 

.159990 

180.2638 

28.0003 

13 

1.4685 

.680951 

16.0863 

10.6350 

63 

6.4379 

.155330 

186.7017 

28.1557 

14 

1.5126 

.661118 

17.5989 

11.2961 

64 

6.6311 

.  150806 

193.3328 

28.3065 

15 

1.5580 

.641862 

19.1569 

11.9379 

65 

6.8300 

.  146413 

200.1627 

28.4529 

16 

1.6047 

.623167 

20.7616 

12.5611 

66 

7.0349 

.142149 

207.1976 

28.5950 

17 

1.6528 

.605016 

22.4144 

13.1661 

67 

7.2459 

.  138009 

214.4436 

28.7330 

18 

1.7024 

.587395 

24.1169 

13.7535 

68 

7.4633 

.  133989 

221.9069 

28.8670 

19 

1.7535 

.570286 

25.8704 

14.3238 

69 

7.6872 

.  130086 

229.5941 

28.9971 

20 

1.8061 

.553676 

27.6765 

14.8775 

70 

7.9178 

.  126297 

237.5119 

29.1234 

21 

1.8603 

.537549 

29.5368 

15.4150 

71 

8.1554 

.122619 

245.6672 

29.2460 

22 

1.9161 

.521893 

31.4529 

15.9369 

72 

8.4000 

.119047 

254.0673 

29.3651 

23 

1.9736 

.506692 

33.4265 

16.4436 

73 

8.6520 

.115580 

262.7193 

29.4807 

24 

2.0328 

.491934 

35.4593 

16.9355 

74 

8.9116 

.112214 

271.6309 

29.5929 

25 

2.0938 

.477606 

37.5530 

17.4131 

75 

9.1789 

.  108945 

280.8098 

29.7018 

26 

2.1566 

.463695 

39.7096 

17.8768 

76 

9.4543 

.  105772 

290.2641 

29.8076 

27 

2.2213 

.450189 

41.9309 

18.3270 

77 

9.7379 

.102691 

300.0020 

29.9103 

28 

2.2879 

.437077 

44.2189 

18.7641 

78 

10.0301 

.099700 

310.0321 

30.0100 

29 

2.3566 

.424346 

46.5754 

19.1885 

79 

10.3310 

.096796 

320.3630 

30.1068 

30 

2.4273 

.411987 

49.0027 

19.6004 

80 

10.6409 

.093977 

331.0039 

30.2008 

31 

2.5001 

.399987 

51.5028 

20.0004 

81 

10.9601 

.091240 

341.9640 

30.2920 

32 

2.5751 

.388337 

54.0778 

20.3888 

82 

11.2889 

.088582 

353.2529 

30.3806 

33 

2.6523 

.377026 

56.7302 

20.7658 

83 

11.6276 

.086002 

364.8805 

30.4666 

34 

2.7319 

.366045 

59.4621 

21.1318 

84 

11.9764 

.083497 

376.857Q 

30.5501 

35 

2.8139 

.355383 

62.2759 

21.4872 

85 

12.3357 

.081065 

389.1927 

30.6312 

36 

2.8983 

.345032 

65  .  1742 

21.8323 

86 

12.7058 

.078704 

401.8984 

30.7099 

37 

2.9852 

.334983 

68.1594 

22.1672 

87 

13.0870 

.076412 

414.9854 

30.7863 

38 

3.0748 

.325226 

71.2342 

22.4925 

88 

13.4796 

.074186 

428.4650 

30.8605 

39 

3.1670 

.315754 

74.4013 

22.8082 

89 

13.8839 

.072026 

442.3489 

30.9325 

40 

3.2620 

.306557 

77.6633 

23.1148 

90 

14.3005 

.069928 

456.6494 

31.0024 

41 

3.3599 

.297628 

81.0232 

23.4124 

91 

14.7295 

.067891 

471.3789 

31.0703 

42 

3.4607 

.288959 

84.4839 

23.7014 

92 

15.1714 

.065914 

486.5502 

31.1362 

43 

3.5645 

.280543 

88.0484 

23.9819 

93 

15.6265 

.063994 

502.1767 

31.2002 

44 

3.6715 

.272372 

91.7199 

24.2543 

94 

16.0953 

.062130 

518.2720 

31.2623 

45 

3.7816 

.264439 

95.5015 

24.5187 

95 

16.5782 

.060320 

534.8502 

31.3227 

46 

3.8950 

.256737 

99.3965 

24.7754 

96 

17.0755 

.058563 

551.9257 

31.3812 

47 

4.0119 

.249259 

103.4084 

25.0247 

97 

17.5878 

.056858 

569.5135 

31.4381 

48 

4.1323 

.241999 

107.5406 

25.2667 

98 

18.1154 

.055202 

587.6289 

31.4933 

49 

4.2562 

.234950 

111.7969 

25.5017 

50 

4.3839 

.228107 

116.1808 

25.7298 

TABLE  XXII. 
INTEREST  TABLES,  THREE  AND  ONE-HALF  PER  CENT. 


e 

1 

Amount  of  One 
Dollar  at  End 
cf  n  Years. 

US 

?8« 

ii:I 

I'oQK 

Amount  cf  One 
Dollar  Per  An- 
num at  End  of 

n  Years. 

Present  Value 
of  One  Dollar 
Per  Annum  for 
n  Years. 

2 

i 

<D-O 

o£  . 

3«I 
II- 

|«o 

5|l*> 

y;| 

!««* 

Amount  of  One 
Dollar  Per  An- 
num at  End  of 
n  Years. 

Present  Value 
of  One  Dollar 
Per  Annum  for 
n  Years. 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

(10) 

1 

.0350 

.966184 

1.0350 

.9662 

51 

5.7804 

.172998 

141.3632 

23.6286 

2 

.0712 

.933511 

2.1062 

1.8997 

52 

5.9827 

.167148 

147.3459 

23.7957 

3 

.1087 

.901943 

3.2149 

2.8016 

53 

6.1921 

.161496 

153.5381 

23.9572 

4 

.1475 

.871443 

4.3625 

3.6731 

54 

6.4088 

.  156035 

159.9469 

24.1133 

5 

.1877 

.841972 

5.5502 

4.5151 

55 

6.6331 

.  150758 

166.5800 

24.2640 

6 

.2293 

.813500 

6.7794 

5.3286 

56 

6.8653 

.  145660 

173.4453 

24.4097 

7 

.2723 

.785991 

8.0517 

6.1145 

57 

7.1056 

.140734 

180.5509 

24.5504 

8 

.3168 

.759410 

9.3685 

6.8740 

58 

7.3543 

.  135975 

187.9052 

24.6864 

9 

.3629 

.733731 

10.7314 

7.6077 

59 

7.6117 

.131377 

195.5169 

24.8178 

10 

.4106 

.708920 

12.1420 

8.3166 

60 

7.8781 

.  126934 

203.3950 

24.9447 

11 

1.4600 

.684945 

13.6020 

9.0016 

61 

8.1538 

.122642 

211.5488 

25.0674 

12 

.1.5111 

.661783 

15.1131 

9.6633 

62 

8.4392 

.118495 

219.9880 

25.1858 

13 

1.5640 

.639403 

16.6770 

10.3027 

63 

8.7346 

.114487 

22N  .  7226 

25.3003 

14 

1.6187 

.617781 

18.2957 

10.9205 

64 

9.0403 

.110616 

237.7629 

25.4110 

15 

1.6753 

.596890 

19.9710 

11.5174 

65 

9.3567 

.  106875 

247.1196 

25.5178 

16 

.7340 

.576692 

21.7050 

12.0941 

66 

9.6842 

.  103261 

256.8038 

25.6211 

17 

.7947 

.557204 

23.4997 

12.6513 

67 

10.0231 

.099769 

266.8269 

25.7209 

18 

.8575 

.538361 

25.3572 

13.1897 

68 

10.3739 

.096395 

277.2008 

25.8173 

19 

.9225 

.520155 

27.2797 

13.7098 

69 

10.7370 

.093136 

287.9379 

25.9104 

20 

.9898 

.502566 

29.2695 

14.2124 

70 

11.1128 

.089986 

299.0507 

26.0004 

21 

2.0594 

.485571 

31.3289 

14.6980 

71 

11.5018 

.086943 

310.5525 

26.0X73 

22 

2.1315 

.469151 

33.4604 

15.1671 

72 

11.9043 

.084003 

322.4568 

26.1713 

23 

2.2061 

.453286 

35.6665 

15.6204 

73 

12.3210 

.081162 

334.7778 

26.2525 

24 

2.2833 

.437957 

37.9499 

16.0583 

74 

12.7522 

.078418 

347.5300 

26.3309 

25 

2.3632 

.423147 

40.3131 

16.4815 

75 

13.1985 

.075766 

360.7286 

26.4067 

26 

2.4460 

.408838 

42.7591 

16.8903 

76 

13.6605 

.073204 

374.3891 

26.4799 

27 

2.5316 

.395012 

45.2907 

17.2853 

77 

14.1386 

.070728 

388.5277 

26.5506 

28 

2.6202 

.381654 

47.9108 

17.6670 

78 

14.6335 

.068337 

403.1611 

26.6189 

29 

2.7119 

.368748 

50.6227 

18.0357 

79 

15.1456 

.066026 

418.3068 

26.6850 

30 

2.8068 

.356278 

53.4295 

18.3920 

80 

15.6757 

.063793 

433.9825 

26.7488 

31 

2.9050 

.344230 

56.3345 

18.7363 

81 

16.2244 

.061636 

450.2069 

26.8104 

32 

3.0067 

.332590 

59.3412 

19.0688 

82 

16.7923 

.059551 

466.9992 

26.8700 

33 

3.1119 

.321343 

62.4532 

19.3902 

83 

17.3800 

.057538 

484.3791 

26.9275 

34 

3.2209 

.310476 

65.6740 

19.7007 

84 

17.9883 

.055592 

502.3674 

26.9831 

35 

3.3336 

.299977 

69.0076 

20.0006 

85 

18.6179 

.053712 

520.9853 

27.0368 

36 

3.4503 

.289833 

72.4579 

20.2905 

86 

19.2695 

.051896 

540.2547 

27.0887 

37 

3.5710 

.280032 

76.0289 

20.5705 

87 

19.9439 

.050141 

560.1987 

27.1388 

38 

3.6960 

.270562 

79.7249 

20.8411 

88 

20.0420 

.048445 

580.8406 

27.1X73 

39 

3.8254 

.261413 

83.5503 

21  .  1025 

89 

21.3644 

.046807 

602.2050 

27.2341 

40 

3.9593 

.252572 

87.5096 

21.3551 

90 

22.1122 

.045224 

624.3172 

27.2793 

41 

4.0978 

.244031 

91.6074 

21.5991 

91 

22.8861 

.043695 

647.2033 

27.3230 

42 

4.2413 

.235779 

95.8487 

21.8349 

92 

23.6871 

.042217 

670.8904 

27.3652 

43 

4.3897 

.227806 

100.2384 

22.0627 

93 

24.5162 

.040789 

695.4066 

27  .  4060 

44 

4.5433 

.220102 

104.7817 

22.2828 

94 

25.3742 

.039410 

720.7808 

27.4454 

45 

4.7024 

.212659 

109.4840 

22.4954 

95 

26.2623 

.038077 

747.0431 

27.4835 

46 

4.8669 

.205468 

114.3510 

22.7009 

96 

27.1816 

.036790 

774.2247 

27.5203 

47 

5.0373 

.  198520 

119.3883 

22.8994 

97 

28.1329 

.035546 

802.3575 

27.5558 

48 

5.2136 

.191806 

124.6018 

23.0912 

98 

29.1175 

.034344 

831.4750 

27.5902 

49 

5.3961 

.  185320 

129.9979 

23.2765 

50 

5.5849 

.  179053 

135.5828 

23.4556 

TABLE  XXIII. 
INTEREST  TABLES,  FOUR  PER  GENT. 


1 

Amount  of  One 
Dollar  at  End 
of  n  Years. 

£{§£*> 

^J°i 

o>  O  a?  a 

|^J 

Amount  of  One 
Dollar  Per  An- 
num at  End  of 
n  Years. 

Present  Value 
of  One  Dollar 
Per  Annum  for 
n  Years. 

r* 

Amount  of  One 
Dollar  at  End 
of  n  Years. 

ssg 
3'iJu' 

>&>"> 

id 

1*** 

Amount  of  One 
Dollar  Per  An- 
num at  End  of 
n  Years. 

Present  Value 
of  One  Dollar 
Per  Annum  for 
n  Years. 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

(10) 

1.0400 

.961538 

1.0400 

.9615 

51 

7.3910 

.135301 

166.1647 

21.6175 

2 

1.0816 

.924556 

2.1216 

1.8861 

52 

7.6866 

.130097 

173.8513 

21.7476 

3 

1  .  1249 

.888996 

3.2465 

2.7751 

53 

7.9941 

.125093 

181.8454 

21.8727 

4 

1  .  1699 

.854804 

4.4163 

3.6299 

54 

8.3138 

.120282 

190.1592 

21.9930 

5 

1.2167 

.821927 

5.6330 

4.4518 

55 

8.6464 

.115656 

198.8055 

22.1086 

6 

.2653 

.790315 

6.8983 

5.2421 

56 

8.9922 

.111207 

207.7978 

22.2198 

7 

.3159 

.759918 

8.2142 

6.0021 

57 

9.3519 

.106930 

217.1497 

22.3267 

8 

.3686 

.730690 

9.5828 

6.7327 

58 

9.7260 

.102817 

226.8757 

22.4296 

9 

.4233 

.702587 

11.0061 

7.4353 

59 

10.1150 

.098863 

236.9907 

22.5284 

10 

.4802 

.675564 

12.4864 

8.1109 

60 

10.5196 

.095060 

247.5103 

22.6235 

11 

.5395 

.649581 

14.0258 

8.7605 

61 

10.9404 

.091404 

258.4507 

22.7149 

12 

.6010 

.624597 

15.6268 

9.3851 

62 

11.3780 

.087889 

269.8288 

22.8028 

13 

.6651 

.600574 

17.2919 

9.9856 

63 

11.8332 

.084508 

281.6619 

22.8873 

14 

.7317 

.577475 

19.0236 

10.5631 

64 

12.3065 

.081258 

293.9684 

22.9685 

15 

.8009 

.555265 

20.8245 

11.1184 

65 

12.7987 

.078133 

306.7671 

23.0467 

16 

.8730 

.533908 

22.6975 

11.6523 

66 

13.3107 

.075128 

320.0778 

23.1218 

17 

.9479 

.513373 

24.6454 

12.1657 

67 

13.8431 

.072238 

333.9209 

23  .  1940 

18 

2.0258 

.493628 

26.6712 

12.6593 

68 

14.3968 

.069460 

348.3177 

23.2635 

19 

2.1068 

.474642 

28.7781 

13.1339 

69 

14.9727 

.066788 

363.2905 

23.3303 

20 

2.1911 

.456387 

30.9692 

13.5903 

70 

15.5716 

.064219 

378.8621 

23.3945 

21 

2.2788 

.438834 

33.2480 

14.0292 

71 

16.1945 

.061749 

395.0566 

23.4563 

22 

2.3699 

.421955 

35.6179 

14.4511 

72 

16.8423 

.059374 

411.8988 

23.5156 

23 

2.4647 

.405726 

38.0826 

14.8568 

73 

17.5160 

.057091 

429.4148 

23.5727 

24 

2.5633 

.390121 

40.6459 

15.2470 

74 

18.2166 

.054895 

447.6314 

23.6276 

25 

2.6658 

.375117 

43.3117 

15.6221 

75 

18.9453 

.052784 

466.5766 

23.6804 

26 

2.7725 

.360689 

46.0842 

15.9828 

76 

19.7031 

.050754 

486.2797 

23.7312 

27 

2.8834 

.346817 

48.9676 

16.3296 

77 

20.4912 

.048801 

506.7709 

23.7800 

28 

2.9987 

.333477 

51.9663 

16.6631 

78 

21.3108 

.046924 

528.0817 

23.8269 

29 

3.1187 

.320651 

55.0849 

16.9837 

79 

22.1633 

.045120 

550.2450 

23.8720 

30 

3.2434 

.308319 

58.3283 

17.2920 

80 

23.0498 

.043384 

573.2948 

23.9154 

31 

3.3731 

.296460 

61.7015 

17.5885 

81 

23.9718 

.041716 

597.2666 

23.9571 

32 

3.5081 

.285058 

65.2095 

17.8736 

82 

24.9307 

.040111 

622.1972 

23.9972 

33 

3.6484 

.274094 

68.8579 

18.1476 

83 

25.9279 

.038569 

648.1251 

24.0358 

34 

3.7943 

.263552 

72.6522 

18.4112 

84 

26.9650 

.037085 

675.0901 

24.0729 

35 

3.9461 

.253415 

76.5983 

18.6646 

85 

28.0436 

.035659 

703.1337 

24.1085 

36 

4.1039 

.243669 

80.7022 

18.9083 

86 

29.1653 

.034287 

732.2991 

24.1428 

37 

4.2681 

.234297 

84.9703 

19.1426 

87 

30.3320 

.032969 

762.6310 

24.1758 

38 

4.4388 

.225285 

89.4091 

19.3679 

88 

31.5452 

.031701 

794.1763 

24.2075 

39 

4.6164 

.216621 

94.0255 

19.5845 

89 

32.8071 

.030481 

826.9833 

24.2380 

40 

4.8010 

.208289 

98.8265 

19.7928 

90 

34.1193 

.029309 

861  .  1027 

24.2673 

41 

4.9931 

.200278 

103.8196 

19.9931 

91 

35.4841 

.028182 

896.5868 

24.2955 

42 

5.1928 

.  192575 

109.0124 

20.1856 

92 

36.9035 

.027098 

933.4902 

24.3226 

43 

5.4005 

.185168 

114.4129 

20.3708 

93 

38.3796 

.026056 

971.8699 

24.3486 

44 

5.6165 

.  178046 

120.0294 

20.5488 

94 

39.9148 

.025053 

1011.7846 

24.3737 

45 

5.8412 

.171198 

125.8706 

20.7200 

95 

41.5114 

.024090 

1053.2960 

24.3978 

46 

6.0748 

.  164614 

131.9454 

20.8847 

96 

43.1718 

.023163 

1096.4679 

24.4209 

47 

6.3178 

.  158283 

138.2632 

21.0429 

97 

44.8987 

.022272 

1141.3666 

24.4432 

48 

6.5705 

.152195 

144.8337 

21.1951 

98 

46.6947 

.021416 

1188.0613 

24.4646 

49 

6.8333 

.146341 

151.6671 

21.3415 

50 

7.1067 

.  140713 

158.7738 

21.4822 

COMBINED  MORTALITY  AND  DISABILITY  TABLE  XXIV. 

National  Fraternal  Congress  Table  of  Mortality  and  Fraternal  Society  Total  and  Permanent 

Disability  Experience. 


Age 

q* 

lx 

log.  ix 

/ 

qx 

18 

.00500 

.00012 

4.07918 

.00512 

19 

.00500 

.00012 

.07918 

.00512 

20 

.00500 

.00012 

.079  IS 

.00512 

21 

.00504 

.00013 

.11394 

.00517 

22 

.00507 

.00015 

.17609 

.00522 

23 

.00511 

.00018 

.25527 

.00529 

24 

.00515 

.00021 

.32222 

.00536 

25 

.00520 

.00025 

.39794 

.00545 

26 

.00526 

.00029 

.40240 

.00555 

27 

.00532 

.00032 

.50515 

.00564 

28 

.00539 

.00034 

.53148 

.00573 

29 

.00547 

.00035 

.54407 

.00582 

30 

.00555 

.00037 

.56820 

.00592 

31 

.00565 

.00038 

.57978 

.00603 

32 

.00575 

.0003',) 

.59106 

.00614 

33 

.00587 

.00041 

.61278 

.00628 

34 

.00600 

.00044 

.64345 

.00644 

35 

.00615 

.00048 

.68124 

.00603 

36 

.00631 

.00052 

.71600 

.00083 

37 

.  00649 

.00056 

.74819 

.00705 

38 

.00670 

.00061 

.78533 

.00731 

39 

.00692 

.00065 

.81291 

.00757 

40 

.00717 

.00069 

.83885 

.00786 

41 

.00745 

.00073 

.86332 

.00818 

42 

.00777 

.00077 

.88649 

.00854 

43 

.00811 

.00082 

.91381 

.00893 

44 

.00848 

.00086 

.93450 

.00934 

45 

.00887 

.00090 

.95424 

.00977 

46 

.00929 

.00094 

.97313 

.01023 

47 

.00975 

.00099 

.99564 

.01074 

48 

.01027 

.00105 

3.02119 

.01132 

49 

.01082 

.00113 

.05308 

.01195 

50 

.01144 

.00124 

.09342 

.01268 

51 

.01215 

.00139 

.  14301 

.01354 

52 

.01290 

.00157 

.  19590 

.01447 

53 

.01375 

.00179 

.25285 

.01554 

54 

.01468 

.00210 

.32222 

.01678 

55 

.01571 

.00255 

.40654 

.01826 

56 

.01686 

.00321 

.50651 

.02007 

57 

.01812 

.00407 

.00959 

.02219 

58 

.01950 

.00504 

.70243 

.02454 

59 

.02105 

.00640 

.91023 

.02751 

60 

.02275 

.00830 

.91908 

.03105 

61 

.02464 

.01035 

2.01494 

.03499 

62 

.02672 

.01290 

.11059 

.03902 

63 

.02903 

.01645 

.21017 

.04548 

64 

.03157 

.02200 

.34212 

.05357 

65 

.03439 

.02955 

.  47056 

.00394 

66 

.03752 

.04010 

.00314 

.07702 

67 

.04096 

.05465 

.73759 

.09561 

68 

.04478 

.07420 

.87040 

.11898 

69 

.04898 

.09975 

.99891 

.  14873 

70 

.05365 

.13230 

1.12150 

.18595 

71 

.05881 

.17285 

.23767 

.23166 

72 

.06449 

.22240 

.34713 

.28689 

73 

.07081 

.28195 

.45017 

.35276 

74 

.07778 

.35250 

.54710 

.43028 

75 

.08548 

.43505 

.03854 

.52053 

76 

.09399 

.52060 

.71050 

.61459 

77 

.10340 

.62015 

.79250 

.72355 

78 

.11384 

.73470 

.86011 

.84854 

79 

.12535 

.85345 

.93118 

1.00000 

ix  =  Probability  of  becoming  totally  and  permanently  disabled. 

q'x  =  ix-f-qx  (N.  F.  C.)-     Not  the  Actuarial  Society  notation.     See  text. 


COMBINED  MORTALITY  AND  DISABILITY  TABLE  XXV. 

National  Fraternal  Congress  Table  of  Mortality  and  Fraternal  Society  Total  and  Permanent 

Disability  Experience. 


Age 

alx 

log.  *lx 

« 

log.  d< 

5lx 

log.  >lx 

18 

100000 

5.00000 

512 

2.70927 

12 

1.07918 

10 

99488 

4.99777 

509 

.70672 

12 

.07695 

20 

98979 

.99554 

507 

.70501 

12 

.07472 

21 

98472 

.99331 

509 

.70672 

13 

.  10725 

22 

97963 

.99106 

511 

.70842 

15 

.16715 

23 

97452 

.98879 

516 

.71265 

18 

.24406 

24 

90936 

.98649 

520 

.71600 

20 

.30871 

25 

96416 

.98415 

525 

.72016 

24 

.38209 

26 

95891 

.98178 

532 

.72591 

28 

.44418 

27 

95359 

.97936 

538 

.73078 

31 

.48451 

28 

94821 

.97690 

543 

.73480 

32 

.50838 

29 

94278 

.97441 

549 

.73957 

33 

.51848 

30 

93729 

.97187 

555 

.74429 

35 

.54007 

31 

93174 

.96929 

562 

.74974 

35 

.54907 

32 

92612 

.96667 

569 

.75511 

36 

.55773 

33 

92043 

.96399 

578 

.76193 

38 

.57677 

34 

91465 

.96125 

589 

.77012 

40 

.60470 

35 

90876 

.95845 

603 

.78032 

44 

.63969 

36 

90273 

.95556 

617 

.79029 

47 

.67156 

37 

89656 

.95258 

632 

.80072 

50 

.70077 

38 

89024 

.94951 

651 

.81358 

54 

.73484 

39 

88373 

.94632 

669 

.82543 

57 

.75923 

40 

87704 

.94302 

689 

.83022 

61 

.78187 

41 

87015 

.93959 

712 

.85248 

64 

.80291 

42 

86303 

.93603 

737 

.86747 

66 

.82252 

43 

85566 

.93230 

764 

.88309 

70 

.84611 

44 

84802 

.92841 

792 

.89873 

73 

.86291 

45 

84010 

.92433 

821 

.91434 

76 

.87857 

46 

83189 

.02007 

851 

.02993 

78 

.89320 

47 

82338 

.91560 

884 

.94645 

82 

.91124 

48 

81454 

.91091 

922 

.96473 

86 

.93210 

49 

80532 

.90597 

962 

.98318 

91 

.95905 

50 

79570 

.90075 

1009 

3.00389 

99 

.99417 

51 

78561 

.89521 

1064 

.02694 

109 

2.03822 

52 

77497 

.88928 

1121 

.04961 

122 

.08518 

53 

76376 

.  SS296 

1187 

.07445 

137 

.13581 

54 

75189 

.87615 

1262 

.10106 

158 

.  19837 

55 

73927 

.86880 

1350 

.  13033 

189 

.27534 

56 

72577 

.86080 

1457 

.16346 

233 

.36731 

57 

71120 

.85199 

1578 

.19811 

289 

.46158 

58 

69542 

.8422.') 

1707 

.23223 

351 

.54468 

59 

67835 

.83145 

1866 

.27091 

438 

.64168 

60 

65909 

.81934 

2048 

.31133 

548 

.73842 

61 

63921 

.80564 

2237 

.34967 

662 

.82058 

62 

61684 

.79017 

2444 

.38810 

796 

.90076 

63 

59240 

.77262 

2694 

.43040 

975 

.98879 

64 

56546 

.75240 

3029 

.48130 

1244 

3.09482 

65 

53517 

.72849 

3422 

.53428 

1581 

.19905 

66 

50095 

.69979 

3888 

.58973 

2009 

.30293 

67 

46207 

.66471 

4418 

.64523 

2525 

.40230 

68 

41789 

.62106 

-1073 

.69662 

3101 

.49157 

69 

36816 

.56604 

5475 

.73838 

3672 

.56495 

70 

31341 

.49611 

5829 

.76559 

4146 

.61767 

71 

25512 

.40674 

5911 

.77166 

4410 

.64441 

72 

19601 

.29228 

5624 

.75005 

4359 

.63941 

73 

13977 

.14541 

4931 

.60294 

3941 

.59558 

74 

9046 

3.95646 

3890 

.58995 

3189 

.50362 

75 

5156 

.71231 

2686 

.42911 

2243 

.35085 

76 

2470 

.39270 

1519 

.18156 

1286 

.10920 

77 

951 

2.97818 

689 

2.83822 

590 

2.77068 

78 

262 

.41830 

222 

.34635 

193 

.28441 

79 

40 

1.60206 

40 

1.60206 

34 

1.53324 

alx  =  Active,  or  premium  paying  members. 

d1x=alx—  alx+1,  number  dying  and  number  totally  and  permanently  disabled  at  age  x  out  of 
the  alx  persons.  *lx  =  *lx  X  ix. 


COMMUTATION  COLUMNS— TABLE  XXVI. 

(Death  Benefit  or  Total  and  Permanent  Disability  Benefit.) 

National  Fraternal  Congress  Table  of  Mortality  and  Fraternal  Society  Total  and  Permanei 
Disability  Experience  and  4  per  cent. 


Age 

*DX 

>NX 

c'x 

Ml 

18 

49363 

994246- 

243.02 

11122.59 

19 

47222 

944883 

232.30 

10879.57 

20 

45172 

897661 

222.49 

10647.27 

21 

43213 

852489 

214.78 

10424.78 

22 

41336 

809276 

207.32 

10210.00 

23 

39538 

767940 

201.30 

10002.68 

24 

37817 

728402 

195.06 

9801.38 

25 

36168 

690585 

189.36 

9606.32 

26 

34587 

654417 

184.51 

9416.96 

27 

33072 

619830 

179.41 

9232.45 

28 

31621 

586758 

174.11 

9053.04 

29 

30230 

555137 

169.27 

8878.93 

30 

28898 

524907 

164.54 

8709.66 

31 

27622 

496009 

160.20 

8545.12 

32 

26400 

468387 

155.96 

8384.92 

33 

25228 

441987 

152.34 

8228.96 

34 

24106 

416759 

149.26 

8076.62 

35 

23029 

392653 

146.93 

7927.36 

36 

21997 

369624 

144.56 

7780.43 

37 

21006 

347627 

142.38 

7635.87 

38 

20056 

326621 

141.02 

7493.49 

39 

19143 

306565 

139.35 

7352.47 

40 

18268 

287422 

137.99 

7213.12 

41 

17427 

269154 

137.11 

7075.13 

42 

16620 

251727 

136.47 

6938.02 

43 

15844 

235107 

136.03 

6801.55 

'  44 

15099 

219263 

135.59 

6665.52 

45 

14382 

204164 

135.15  ' 

6529.93 

46 

13694 

189782 

134.70 

6394.78 

47 

13033 

176088 

134.54 

6260.08 

48 

12397 

163055 

134.93 

6125.54 

49 

11785 

150658 

135.37 

5990.61 

50 

11196 

138873 

136.51 

5855.24 

51 

10629 

127677 

138.42 

5718.73 

52 

10082 

117048 

140.23 

5580.31 

53 

9554.1 

106966 

142.77 

5440.08 

54 

9043.8 

97411.9 

145.96 

5297.31  ' 

55 

8550.1 

88368.1 

150.13 

5151.35 

56 

8071.0 

79818.0 

155.80 

5001.22 

57 

7604.8 

71747.0 

162.25 

4845.42 

58 

7150.2 

64142.2 

168.76 

4683.17 

59 

6706.3 

56992.0 

177.38 

4514.41 

60 

6271.0 

50285.7 

187.20 

4337.03 

61 

5842.7 

44014.7 

196.61 

4149.83 

62 

5421.3 

38172.0 

206.54 

3953.22 

63 

5006.3 

32750.7 

218.91 

3746.68 

64 

4594.8 

27744.4 

236.66 

3527.77 

65 

4181.4 

23149.6 

257.09 

3291.11 

66 

3763.5 

18968.2 

280.87 

3034.02 

67 

3338.0 

15204.7 

306.87 

2753.15 

68 

2903.4 

11866.7 

332.14 

2446.28 

69 

2458.9 

8963.3 

351.60 

2114.14 

70 

2012.7 

6504.4 

359.93 

1762.54 

71 

1575.3 

4491.75 

350.96 

1402.61 

72 

1163.8 

2916.45 

321.09 

1051.65 

73 

797.96 

1752.55 

270.69 

730.56 

74 

496.58 

954.59 

205.33 

459.87 

75 

272.15 

458.01 

136.33 

254.54 

76 

125.36 

185.86 

74.129 

118.212 

77 

46.41 

60.509 

32.331 

44.083 

78 

12.294 

14.099 

10.017 

11.752 

79 

1.805 

1.805 

1.735 

1.735 

COMMUTATION  COLUMNS— TABLE  XXVII. 

(Death  Benefit  or  Total  and  Permanent  Disability  Benefit.) 

National  Fraternal  Congress  Table  of  Mortality  and  Fraternal  Society  Total  and  Permanent 
Disability  Experience  and  4  per  cent. 


Age 

X 

X 

<," 

Mx12 

18 

48292.5 

969564 

247.83 

11343.26 

19 

46197.0 

921272 

236.90 

11095.42 

20 

44192.5 

875075 

226.90 

10858.52 

21 

42274.5 

830882 

219.03 

10631.62 

22 

40437.0 

788608 

211.43 

10412.59 

23 

38677.5 

748171 

205.29 

10201.16 

24 

36992.5 

709493 

198.93 

9995.87 

25 

35377.5 

672500 

193.11 

9796.94 

26 

33829.5 

637123 

188.16 

9603.83 

27 

32346.5 

603294 

182.97 

9415.67 

28 

30925.5 

570947 

177.56 

9232.70 

29 

29564.0 

540022 

172.62 

9055.14 

30 

28260.0 

510458 

167.80 

8882.22 

31 

27011.0 

482198 

163.38 

8714.42 

32 

25814.0 

455187 

159.05 

8551.04 

33 

24667.0 

429373 

155.35 

8391.99 

34 

23567.5 

404706 

152.22 

8236.64 

35 

22513.0 

381138 

149.84 

8084.42 

36 

21501.5 

358625 

147.43 

7934.58 

37 

20531.0 

337124 

145.20 

7787  .  15 

38 

19599.5 

316593 

143.81 

7641.95 

39 

18705.5 

296993 

142.11 

7498.14 

40 

17847.5 

278288 

140.72 

7356.03 

41 

17023.5 

260440 

139.83 

7215.31 

42 

16232.0 

243417 

139.17 

7075.48 

43 

15471.5 

227185 

138.72 

6936.31 

44 

14740.5 

211713 

138.28 

6797.59 

45 

14038.0 

196973 

137.83 

6659.31 

46 

13363.5 

182935 

137.37 

6521.48 

47 

12715.0 

169571 

137.21 

6384.11 

48 

12091.0 

156856 

137.60 

6246.90 

49 

11490.5 

144765 

138.05 

6109.30 

50 

10912.5 

133275 

139.22 

5971.25 

51 

10355.5 

122363 

141.17 

5832.03 

52 

9818.05 

112007 

143.01 

5690.86 

53 

9298.95 

102189 

145.60 

5547.85 

54 

8796.95 

92890 

148.85 

5402.25 

55 

8310.55 

84093 

153.10 

5253.40 

56 

7837.90 

75782.5 

158.88 

5100.30 

57 

7377.50 

67944.6 

165.46 

4941.42 

58 

6928.25 

60567  .  1 

172.10 

4775,96 

59 

6488.65 

53638.8 

180.90 

4603.86 

60 

6056.85 

47150.2 

190.91 

4422.96 

61 

5632  .60 

41093.3 

200.50 

4232.05 

62 

5213.80 

35461.3 

210.63 

4031.55 

63 

4800.55 

30247.5 

223.25 

3820.92 

64 

4388.10 

25446.0 

241.35 

3597.67 

65 

3972.45 

21058.9 

262.18 

3356.32 

66 

3550.75 

17086.4 

286.43 

3094.14 

67 

3120.70 

13535.7 

312.95 

2807.71 

68 

2681  .  15 

10415.0 

338.72 

2494.76 

69 

2235.80 

7733.81 

358.57 

2156.04 

70 

1794.00 

5498.01 

367.06 

1797.47 

71 

1369.55 

3704.01 

357.92 

1430.41 

72 

980.88 

2334.46 

327.45 

1072.49 

73 

647.27 

1353.58 

276.05 

745.04 

74 

384.365 

706.308 

209.40 

468.99 

75 

198.755 

321.943 

139.03 

259  .59 

76 

85.885 

123.188 

75.598 

120.555 

77 

29.352 

37.303 

32.972 

44.957 

78 

7.049 

7.951 

10.215 

11.985 

79 

.902 

.902 

1.770 

1.770 

M 


SC 


'12 


2  "D1 


il)1 


COMMUTATION  COLUMNS— TABLE  XXVIII. 

(Total  and  Permanent  Disability  Benefit  not  in  Combination  with  a  Death  Benefit.) 

National  Fraternal  Congress  Table  of  Mortality  and  Fraternal  Society  Total  and  Permanent 

Disability  Experience  and  4  per  cent. 


Age 

'Cx 

log.  *C* 

JMX 

log.  'M* 

18 

5.70 

0.75555 

3151.95 

3.49859 

19 

5.45 

.73628 

3146.25 

.497SO 

20 

5.21 

.71702 

3140.80 

.49704 

21 

5.40 

.73252 

3135.59 

.49632 

22 

5.90 

.77538 

3130.19 

.49557 

23 

6.84 

.83526 

3124.23 

.49474 

24 

7.64 

.88288 

3117.39 

.49379 

25 

8.69 

.93922 

3109.75 

.49273 

26 

9.05 

.98428 

3101.06 

.49152 

27 

10.18 

1.00758 

3091.41 

.49016 

28 

10.34 

.01441 

3081.23 

.48872 

29 

10.17 

.00748 

3070.89 

.48727 

30 

10.28 

.01204 

3060.72 

.48582 

31 

10.09 

.00400 

3050.44 

.48436 

32 

9.90 

0.99563 

3040.35 

.48293 

33 

9.95 

.99764 

3030.45 

.48151 

34 

10.20 

1.00853 

3020.50 

.48008 

35 

10.63 

.02649 

3010.30 

.47861 

36 

11.00 

.04133 

2999.67 

.47708 

37 

11.31 

.05350 

2988.67 

.47548 

38 

11.76 

.07054 

2977.36 

.47384 

39 

11.97 

.07790 

2965.60 

.47211 

40 

12.12 

.08350 

2953.63 

.47035 

41 

12.23 

.08751 

2941.51 

.46857 

42 

12.31 

.09009 

2929.28 

.46676 

43 

12.49 

.09664 

2916.97 

.46494 

44 

12.49 

.09641 

2904.48 

.46307 

45 

12.45 

.09504 

2891  .99 

.46120 

46 

12.38 

.09263 

2879.54 

.45932 

47 

12.41 

.09364 

2867.16 

.45746 

48 

12.52 

.09747 

2854.75 

.45558 

49 

12.81 

.10738 

2S42.23 

.45365 

50 

13.35 

.12547 

2829.42 

.45169 

51 

14.21 

.  15249 

2816.07 

.44965 

52 

15.22 

.18241 

2801.86 

.44745 

53 

16.44 

.21601 

2786.64 

.44507 

54 

18.26 

.26154 

2770.20 

.44251 

55 

20.97 

.32147 

2751.94 

.43963 

56 

24.91 

.39641 

2730.97 

.43632 

57 

29.77 

.47365 

2706.06 

.43234 

58 

34.65 

.53971 

2676.29 

.42753 

59 

41.66 

.61968 

2641.64 

.42187 

60 

50.05 

.69939 

2599.98 

.41487 

61 

58.14 

.76451 

2549.93 

.40652 

62 

67.25 

.82766 

2491.79 

.39651 

63 

79.20 

.89866 

2424.54 

.38462 

64 

97.21 

.98765 

2345.34 

.37020 

65 

1U8.81 

2.07485 

2248.13 

.35182 

66 

145.11 

.16170 

2129.32 

.32824 

67 

175.40 

.24403 

1984.21 

.29759 

68 

207.14 

.31627 

1808.81 

.25739 

69 

235.84 

.37262 

1601.67 

.20458 

70 

256.04 

.40830 

1365.83 

.13539 

71 

261.82 

.41801 

1109.79 

.04524 

72 

248.88 

.39598 

847.97 

2.92838 

73 

216.33 

.33511 

599.09 

.77749 

74 

168.31 

.22612 

382.76 

.58293 

75 

113.85 

.05632 

214.45 

.33133 

76 

62.75 

1.79763 

100.60 

.00260 

77 

27.68 

.44208 

37.85 

1.57807 

78 

8.69 

0.93878 

10.17 

.00732 

79 

1.48 

.  17057 

1.48 

0.17026 

COMMUTATION  COLUMNS— LOGARITHMS— TABLE  XXIX. 

(Death  Benefit  or  Total  and  Permanent  Disability  Benefit.) 

National  Fraternal  Congress  Table  of  Mortality  and  Fraternal  Society  Total  and  Perma- 
nent Disability  Experience  and  4  Per  Cent. 


Age. 

log.  aDx 

log.  *Dx2 

log.  aNx 

log-  *N<2 

log-  Cx 

log.  Mx 

18 

4.69340 

4.68388 

5.99750 

5.98657 

2.38564 

4.04622 

19 

.67414 

.66461 

.97538 

.96439 

.36605 

.03663 

20 

.65487 

.64535 

.95311 

.94204 

.34731 

.02723 

21 

.63561 

.62608 

.93069 

.91954 

.33199 

.01808 

22 

.61633 

.60678 

.90810 

.89636 

.31665 

.00903 

23 

.59702 

.58746 

.88533 

.87400 

.30585 

.00013 

24 

.57760 

.56812 

.86237 

.85095 

.29017 

3.99129 

25 

.55832 

.54873 

.83921 

.82769 

.27729 

.98256 

26 

.53891 

.52930 

.81586 

.80422 

.26601 

.97391 

27 

.51946 

.50983 

.79227 

.78053 

.25385 

.96532 

28 

.49997 

.49032 

.76846 

.75660 

.24083 

.95679 

29 

.48044 

.47076 

.74440 

.73241 

.22857 

.94836 

30 

.46087 

.45117 

.72008 

.70796 

.21626 

.94000 

31 

.44126 

.43154 

.69549 

.68323 

.20467 

.93172 

32 

.42160 

.41186 

.67061 

.65819 

.  19301 

.92350 

33 

.40189 

.39212 

.64541 

.63283 

.18280 

.91535 

34 

.38212 

.37232 

.61989 

.60714 

.  17395 

.90723 

35 

.36228 

.35243 

.59401 

.58108 

.16712 

.89913 

36 

.34236 

.33248 

.56776 

.55465 

.16006 

.89100 

37 

.32235 

.31241 

.54112 

.52778 

.  15345 

.88286 

38 

.30224 

.29226 

.51404 

.50050 

.  14928 

.87468 

39 

.28202 

.27198 

.48652 

.47274 

.14410 

.86644 

40 

.26169 

.25159 

.45852 

.44450 

.  13985 

.85812 

41 

.24122 

.23106 

.42999 

.41571 

.  13708 

.84973 

42 

.22063 

.21037 

.40094 

.38636 

.  13504 

.84123 

43 

.19987 

.  18955 

.37127 

.35637 

.13362 

.83261 

44 

.17894 

.  16853 

.34096 

.32574 

.13223 

.82383 

45 

.15783 

.14731 

.30997 

.29440 

.  13081 

.81491 

46 

.13654 

.  12594 

.27825 

.26228 

.12936 

.80583 

47 

.11503 

.10432 

.24573 

.22935 

.12885 

.79658 

48 

.09331 

.08246 

.21232 

.  19551 

.13010 

.78714 

49 

.07134 

.06036 

.17800 

.16062 

.13151 

.77747 

50 

.04908 

.03794 

.14261 

.12473 

.13519 

.76754 

51 

.02651 

.01519 

.10612 

.08764 

.14121 

.75730 

52 

.00355 

3.99203 

.06837 

.04926 

.14684 

.74666 

53 

3.98019 

.96844 

.02926 

.00941 

.15455 

.73561 

54 

.95635 

.94433 

4.98861 

4.96797 

.  16423 

.72405 

55 

.93197 

.91963 

.94630 

.92476 

.17646 

.71193 

56 

.90693 

.89420 

.90210 

.87957 

.  19256 

.69907 

57 

.88109 

.86791 

.85580 

.83216 

.21018 

.68533 

58 

.85432 

.84063 

.80714 

.78224 

.22726 

.67054 

59 

.82648 

.81216 

.75581 

.72948 

.24891 

.65460 

60 

.79734 

.78225 

.70145 

.67348 

.27230 

.63719 

61 

.76661 

.75066 

.64360 

.61377 

.29360 

.61803 

62 

.73410 

.71715 

,58174 

.54975 

.31500 

.59695 

63 

.69952 

.68130 

.51522 

.48070 

.34027 

.57365 

64 

.66227 

.64228 

.44317 

.40564 

.37413 

.54750 

65 

.62132 

.59900 

.36455 

.32344 

.41008 

.51734 

66 

.57.");-)'.) 

£5033 

.27802 

.23264 

.44850 

.48202 

67 

.52348 

.49425 

.18199 

.13149 

.48696 

.43984 

68 

.46290 

.42833 

.07434 

.01766 

.52132 

.38851 

69 

.31)074 

.34943 

3.95247 

3.88839 

.54605 

.32513 

70 

.30378 

.25382 

.81321 

.  74020 

.55622 

.24613 

71 

.19737 

.13659 

.65241 

.56867 

.54526 

.14693 

72 

.06588 

2.99162 

.46485 

.36819 

.50662 

.02189 

73 

2.90198 

.81109 

.24368 

.  13149 

.43247 

2.86366 

74 

.69599 

.5847") 

2.97982 

2.84900 

.31245 

.66264 

75 

.43481 

.29833 

.66088 

.50777 

.13458 

.40576 

76 

.09817 

1.93392 

.26921 

.09058 

1.86999 

.07265 

77 

1.66661 

.46764 

1.78182 

1.57174 

.50962 

1.64427 

78 

.08970 

0.84813 

.14919 

0.90042 

.00072 

.07011 

79 

.25643 

1.95521 

0.25648 

1.95521 

0.23939 

0.23930 

*Dx+aDx+i 
2 


M  =  s  c . 


348 


TABLE  XXX. 
ANNUITIES,  SINGLE  PREMIUMS  AND  ANNUAL  PREMIUMS. 

National  Fraternal  Congress  Table  of  Mortality  and  Fraternal  Society  Total  and  Perma- 
nent Disability  Experience  and  4  Per  Cent. 


Ifjif 

•    -n     3 

fiffflf 

III1.! 

"§•  §  i-a  oo  Q 

ifltP1 

Age. 

log.  aa" 

-? 

log.  aAx2 

•A- 

log.  *P£2 

X 

18 

1.29317 

19.64 

2.36133 

229.79 

1.06816 

11.70 

19 

.29025 

19.51 

.37099 

234.96 

.08074 

12.04 

20 

.28717 

19.37 

.38092 

240.39 

.09375 

12.41 

21 

.28393 

19.23 

.39101 

246.04 

.  10708 

12.80 

22 

.28053 

19.08 

.40125 

251.91 

.  12072 

13.20 

23 

.27698 

18.92 

.41162 

258.00 

.13464 

13.64 

24 

.27326 

18.76 

.42213 

264.32 

.14887 

14.09 

25 

.26937 

18.59 

.43277 

270.88 

.  16340 

14.57 

26 

.26531 

18.42 

.44353 

277.67 

.17822 

15.07 

27 

.26107 

18.24 

.45439 

284.70 

.  19332 

15.61 

28 

.25663 

18.06 

.46536 

291.98 

.20873 

16.17 

29 

.25197 

17.86 

.47645 

299.54 

.22448 

16.77 

30 

.24709 

17.66 

.48765 

307.36 

.24056 

.17.40 

31 

.24197 

17.46 

.49898 

315.49 

.25701 

18.07 

32 

.23659 

17.24 

.51042 

323.91 

.27383 

18.79 

33 

.23094 

17.02 

.52198 

332.64 

.29104 

19.55 

34 

.22502 

16.79 

.53363 

341.69 

.30861 

20.35 

35 

.21880 

16.55 

.54537 

351.05 

.32657 

21.21 

36 

.21229 

16.30 

.55717 

360.72 

.34488 

22.13 

37 

.20543 

16.05 

.56903 

370.71 

.36360 

23.10 

38 

.19826 

15.79 

.58096 

381.03 

.38270 

24.14 

39 

.19072 

15.51 

.59293 

391.68 

.40221 

25.25 

40   . 

.18281 

15.23 

.60495 

402.67 

.42214 

26.43 

41 

.17449 

14.95 

.61703 

414.03 

.44254 

27.70 

42 

.16573 

14.65 

.62913 

425.73 

.46340 

29.07 

43 

.15650 

14.34 

.64126 

437.78 

.48476 

30.53 

44 

.  14680 

14.02 

.65342 

450.22 

.50662 

32.11 

45 

.13657 

13.70 

.66560 

463.02 

.52903 

33.81 

46   ' 

.12574 

13.36 

.67781 

476.22 

.55207 

35.65 

47 

.11432 

13.01 

.69007 

489.86 

.57575 

37.65 

48 

.  10220 

12.65 

.70235 

503.91 

.60015 

39.82 

49 

.08934 

12.28 

.71465 

518.38 

.62531 

42.20 

50 

.07565 

11.90 

.72698 

533.31 

.65133 

44.81 

51 

.06113 

11.51 

.73931 

548.67 

.67818 

47.66 

52 

.04571 

11.11 

.75163 

564.46 

.70592 

50.81 

53 

.02922 

10.70 

.76393 

580.67 

.73471 

54.29 

54 

.01162 

10.27 

.77622 

597.34 

.76460 

58.16 

55 

0.99279 

9.84 

.78847 

614.43 

.79568 

62.47 

56 

.97264 

9.39 

.80067 

631.93 

.82803 

67.30 

57 

.95107 

8.94 

.81276 

649.77 

.86169 

72.73 

58 

.92792 

8.47 

.82474 

667.94 

.89682 

78.85 

59 

.90300 

8.00 

.83665 

686.52 

.93365 

85.83 

60 

.87614 

7.52 

.84838 

705.31 

.97224 

93.81 

349 


TABLE  XXX. 
ANNUITIES,  SINGLE  PREMIUMS  AND  ANNUAL  PREMIUMS— Continued. 

National  Fraternal  Congress  Table  of  Mortality  and  Fraternal  Society  Total  and  Perma- 
nent Disability  Experience  and  4  Per  Cent — Continued. 


i§£&3 

^>> 

illjlii 

"on-JS'S  Q 

QJ  "^  ^H  "S  '_3   fi 

J  ^"g.1-3 

2  I  111  1 

a  S     "J5  2-o.S 

If  a  .1 

a'31*3! 

4i*JJ«'a 

Age. 

log.  **\2 

aC 

log.  aA*2 

X 

log.  *P^2 

X 

61 

.84716 

7.03 

.85994 

724.34 

2.01278 

102.99 

62 

.81565 

6.54 

.87137 

743.65 

.05572 

113.69 

63 

.78118 

6.04 

.88265 

763.22 

.10147 

126.32 

64 

.74337 

5.54 

.89375 

782.98 

.  15038 

141.38 

65 

.70212 

5.04 

.90454 

802.68 

.20242 

159.37 

66 

.65705 

4.54 

.91494 

822.13 

.25789 

181.09 

67 

.60801 

4.06 

.92487 

841.14 

.31686 

207.42 

68 

.55476 

3.59 

.93414 

859.29 

.37938 

239.54 

69 

.49765 

3.15 

.94291 

876.82 

.44526 

278.78 

70 

.43642 

2.73 

.95089 

893.08 

.51447 

326.94 

71 

.37130 

2.35 

.95809 

908.01 

.58679 

386.18 

72 

.30231 

2.01 

.96452 

921.55 

.66221 

459.42 

73 

.22951 

1.70 

.97020 

933.68 

.74069 

550.41 

74 

.15301 

1.42 

.97517 

944.43 

.82216 

663.99 

75 

.07296 

1.18 

.97948 

953.85 

.90652 

806.34 

76 

1.99241 

.98 

.98303 

961.68 

.99062 

978.63 

77 

.90513 

.80 

.98619 

968.70 

3.08106 

1205.20 

78 

.81072 

.65 

.98894 

974.85 

.17822 

1507.40 

79 

.69878 

.50 

.99154 

980.71 

.29276 

1962.30 

350 


TABLE  XXXI. 
FRATERNAL  DEATH  AND  DISABILITY  EXPERIENCE. 


Age. 

lx 

d* 

Px 

Qx 

,aa 

if 

pT 

qf 

20 

100000 

500 

.9950000 

.0050000 

100000 

498 

.994904 

.004976 

21 

99500 

501 

.9949648 

.0050352 

99490 

492 

.994923 

.004947 

22 

98999 

502 

.9949292 

.0050708 

98982 

498 

.994823 

.005027 

23 

98497 

503 

.9948932 

.0051068 

98473 

494 

.994805 

.005015 

24 

97994 

505 

.9948466 

.0051534 

97961 

499 

.994696 

.005094 

25 

97489 

507 

.9947994 

.0052006 

97446 

494 

.994677 

.005073 

26 

96982 

510 

.9947413 

.0052587 

96927 

500 

.994549 

.005161 

27 

96472 

513 

.9946824 

.0053176 

96403 

496 

.994540 

.005140 

28 

95959 

517 

.9946123 

.0053877 

95875 

500 

.994440 

.005220 

29 

95442 

522 

.9945307 

.0054693 

95343 

505 

.994349 

.005301 

30 

94920 

527 

.9944480 

.0055520 

94807 

510 

.994260 

.005380 

31 

94393 

533 

.9943534 

.0056466 

94266 

506 

.994249 

.005371 

32 

93860 

540 

.9942468 

.0057532 

93720 

520 

.994059 

.005551 

33 

93320 

548 

.9941277 

.0058723 

93167 

525 

.993950 

.005640 

34 

92772 

557 

.9939960 

.0060040 

92606 

530 

.993842 

.005718 

35 

92215 

567 

.9938513 

.0061487 

92035 

534 

.993714 

.005806 

36 

91648 

578 

.9936933 

.0063067 

91452 

547 

.993496 

.005984 

37 

91070 

591 

.9935105 

.0064895 

90857 

559 

.993288 

.006152 

38 

90479 

606 

.9933023 

.0066977 

90248 

571 

.993061 

.006329 

39 

89873 

622 

.9930791 

.0069209 

89622 

582 

.992853 

.006497 

40 

89251 

640 

.9928292 

.0071708 

88979 

603 

.992535 

.006775 

41 

88611 

660 

.9925517 

.0074483 

88317 

613 

.992328 

.006942 

42 

87951 

683 

.9922343 

.0077657 

87636 

641 

.991920 

.007310 

43 

87268 

708 

.9918871 

.0081129 

86931 

659 

.991603 

.007577 

44 

86560 

734 

.9915203 

.0084797 

86200 

685 

.991195 

.007945 

45 

85826 

761 

.9911332 

.0088668 

85443 

710 

.990787 

.008313 

46 

85065 

790 

.9907130 

.0092870 

84659 

734 

.990390 

.008670 

47 

84275 

822 

.9902462 

.0097538 

83846 

766 

.989873 

.009137 

48 

83453 

857 

.9897307 

.0102693 

83001 

796 

.989357 

.009593 

49 

82596 

894 

.9891762 

.0108238 

82120 

826 

.988812 

.010058 

50 

81702 

935 

.9885560 

.0114440 

81200 

862 

.988149 

.010611 

51 

80767 

981 

.9878540 

.0121460 

80234 

903 

.987358 

.011252 

52 

79786 

1029  . 

.9871030 

.0128970 

79216 

949 

.986449 

.011981 

53 

78757 

1083 

.9862488 

.0137512 

78143 

1000 

.985413 

.012797 

54 

77674 

1140 

.9853233 

.0146767 

77007 

1047 

.984303 

.013597 

55 

76534 

1202 

.9842946 

.0157054 

75800 

1097 

.982982 

.014468 

56 

75332 

1270 

.9831413 

.0168587 

74510 

1154 

.981304 

.015486 

57 

74062 

1342 

.9818800 

.0181200 

73120 

1202 

.979489 

.016441 

58 

72720 

1418 

.9805006 

.0194994 

71619 

1255 

.977430 

.017530 

59 

71302 

1501 

.9789487 

.0210513 

70002 

1310 

.974820 

.  .018720 

60 

69801 

1588 

.9772496 

.0227504 

68243 

1358 

.971807 

.019893 

61 

68213 

1681 

.9753566 

.0246434 

66323 

1395 

.968721 

.021029 

62 

66532 

1778 

.9732760 

.0267240 

64245 

1434 

.964976 

.022324 

63 

64754 

1880 

.9709670 

.0290330 

61994 

1463 

.960274 

.023606 

64 

62874 

1985 

.9684289 

.0315711 

59529 

1482 

.954040 

.024890 

65 

60889 

2094 

.9656096 

.0343904 

56795 

1473 

.946052 

.025928 

351 


TABLE  XXXI— Continued. 
FRATERNAL  DEATH  AND  DISABILITY  EXPERIENCE—  Continued. 


Age. 

1* 

dx 

Px 

qx 

,aa 

,aa 

dx 

Pf 

qf 

66 

58795 

2206 

.9624798 

.0375202 

53732 

1432 

.935705 

.026645 

67 

56589 

2318 

.9590380 

.0409620 

50276 

1355 

.922617 

.026953 

68 

54271 

2430 

.9552247 

.0447753 

46387 

1230 

.906733 

.026507 

69 

51841 

2539 

.9510233 

.0489767 

42062 

1069 

.890657 

.025403 

70 

49302 

2645 

.9463511 

.0536489 

37464 

866 

.865553 

.023117 

71 

46657 

2744 

.9411878 

.0588122 

32425 

636 

.841035 

.019605 

72 

43913 

2832 

.9355088 

.0644912 

27270 

404 

.815443 

.014827 

73 

41081 

2909 

.9291887 

.0708113 

22238 

199 

.789161 

.008949 

74 

38172 

2969 

.9222205 

.0777795 

17549 

43 

.762593 

.002477 

75 

3o203 

3009 

.9145243 

.0854757 

13383 

76 

32194 

3026 

.9060073 

.0939927 

9780 

77 

29168 

3016 

.8965990 

.  1034010 

6731 

78 

26152 

2977 

.8861655 

.1138345 

4228 

79 

23174 

2905 

.8746494 

.  1253506 

2213 

80 

20270 

2799 

.8619142 

.  1380858 

844 

81 

17471 

2659 

.8478049 

.1521951 

61 

82 

14812 

2485 

.8322306 

.  1677694 

83 

12327 

2280 

.8150402 

.  1849598 

84 

10047 

2050 

.7959590 

.2040410 

lx,  dx,  PX  and  qx  are  taken  from  the 

85 

7997 

1800 

.7749156 

.2250844 

National  Fraternal  Congress  Table  of 

Mortality  and  the  disability  ratios 

86 

87 

6197 

4658 

1539 
1277 

.7516540 
.7258480 

.2483460 
.2741520 

from  the  experience  of  four  Fraternal 
beneficiary  societies.  Modifications  of 

88 

3381 

1023 

.6974268 

.3025732 

one  or  the  other  would  have  been 

89 

2358 

788 

.6658185 

3341815 

necessary  in  order  to  have  assigned 

90 

1570 

579 

.6312102 

.3687898 

any  deaths  (df)  to  the  laa  column, 

91 

991 

404 

.5923310 

.4076690 

or  to  have  obtained  any  positive 

92 
93 

587 
323 

264 
161 

.5502555 
.5015480 

.4497445 
.4984520 

values  for  qaa  and  pf  at  any  age 

94 

162 

89 

.4506173 

.5493827 

older  than  74.  I  did  not  make  the 

95 

73 

44 

.3972603 

.6027397 

modifications,  but  permitted  the  last 

three  columns  to  vanish  at  age  75. 

96 

29 

19 

.3448276 

.6551724 

The  formulas  employed  were  those 

97 

10 

7 

.3000000 

.7000000 

given  by  Mr.  F.  B.  Mead  in  his  paper 

98 

3 

3 

.0000000 

1.0000000 

in  the  May,  1910,  Transactions  of  the 

Actuarial  Society  for  values  at  ages 

_  j.1  *rr     TJ  nr  c*r\  \\ 

following: 


-^("^-i^^  because  qf  =  0). 


For  ages  younger  than  75: 


352 


TABLE  XXXII. 
FRATERNAL  DEATH  AND  DISABILITY  EXPERIENCE. 


Age. 

I? 

dl! 

iL 

dl 

pL 

qL 

rf! 

q* 

20 

00 

2 

2191100 

876400 

.6000 

.4000 

.000096 

.000024 

21 

10 

6 

1314700 

456340 

.6529 

.3471 

.000107 

.000023 

22 

17 

8 

858360 

260600 

.6964 

.3036 

.000127 

.000023 

23 

24 

9 

597760 

160020 

.7323 

.2677 

.000155 

.000025 

24 

33 

11 

437740 

104440 

.7614 

.2386 

.000184 

.000026 

25 

43 

12 

333300 

71830 

.7845 

.2155 

.000223 

.000027 

26 

55 

14 

261470 

51670 

.8024 

.1976 

.000261 

.000029 

27 

69 

16 

209800 

38600 

.8160 

.1840 

.000290 

.000030 

28 

84 

18 

171200 

29750 

.8262 

.1738 

.000310 

.000030 

29 

99 

19 

141450 

23500 

.8339 

.1661 

.000321 

.000029 

30 

113 

21 

117950 

18883 

.8399 

.1601 

.000340 

.000030 

31 

127 

23 

99067 

15376 

.8448 

.  1552 

.000351 

.000029 

32 

140 

24 

83691 

12637 

.8490 

.1510 

.000361 

.000029 

33 

153 

25 

71054 

10403 

.8536 

.1464 

.000380 

.000030 

34 

166 

27 

60651 

8691 

.8567 

.  1433 

.000408 

.000032 

35 

180 

28 

51960 

7305 

.8594 

.1406 

.000446 

.000034 

36 

196 

31 

44655 

6172 

.8618 

.1382 

.000484 

.000036 

37 

213 

33 

38483 

5237 

.8639 

.  1361 

.000522 

.000038 

38 

231 

35 

33246 

4465 

.8657 

.1343 

.000569 

.000041 

39 

251 

37 

28781 

3822 

.8672 

.1328 

.000607 

.000043 

40 

272 

39 

24959 

3282 

.8685 

.1315 

.000645 

.000045 

41 

294 

43 

21677 

2827 

.8696 

.1304 

.000682 

.000048 

42 

315 

45 

18850 

2441 

.8705 

.1295 

.000720 

.000050 

43 

337 

48 

16409 

2113 

.8712 

.1288 

.000767 

.000053 

44 

360 

51 

14296 

1833 

.8718 

.1282 

.000805 

.000055 

45 

383 

54 

12463 

1591 

.8723 

.1277 

.000843 

.000057 

46 

406 

57 

10872 

1384 

.8727 

.1273 

.000880 

.000060 

47 

429 

60 

9488 

1205 

.8730 

.1270 

.000927 

.000063 

48 

452 

63 

8283 

1050 

.8732 

.1268 

.000983 

.000067 

49 

476 

67 

7233 

917 

.8733 

.1267 

.001058 

.000072 

50 

502 

70 

6316 

800 

.8733 

.1267 

.001161 

.000079 

51 

533 

75 

5516 

699 

.8733 

.1267 

.001302 

.000088 

52 

570 

80 

4817 

610 

.8733 

.1267 

.001471 

.000099 

53 

614 

87 

4207 

534 

.8732 

.1268 

.001677 

.000113 

54 

667 

95 

3673 

466 

.8732 

.1268 

.001967 

.000133 

55 

734 

105 

3207 

406 

.8732 

.1268 

.002388 

.000162 

56 

822 

118 

2801 

356 

.8731 

.1269 

003006 

.000204 

57 

942 

139 

2445 

310 

.8731 

.1269 

003811 

.000259 

58 

1101 

162 

2135 

271 

.8730 

.1270 

004720 

.000320 

59 

1300 

194 

1864 

237 

.8730 

.1270 

006050 

.000410 

60 

1558 

234 

1627 

207 

.8730 

.1270 

007773 

.000527 

61 

1890 

283 

1420 

180 

.8730 

.1270 

009599 

.000651 

62 

2287 

342 

1240 

158 

.8729 

.1271 

011894 

.000806 

63 

2760 

414 

1082 

137 

.8729 

.1271 

015096 

.001024 

64 

3345 

505 

945 

120 

.8728 

.1272 

019730 

.001340 

65 

4094 

622 

825 

105 

.8728 

.1272 

026238 

.001782 

353 


TABLE  XXXII— Continued. 
FRATERNAL  DEATH  AND  DISABILITY  EXPERIENCE— Continued. 


Age. 

il! 

dS 

iL 

dL 

Px 

qL 

Pax 

ai 

qx 

66 

5063 

773 

720 

92 

.8727 

.1273 

.035255 

.002395 

67 

6313 

964 

628 

80 

.8727 

.1273 

.047223 

.003207 

68 

7884 

1202 

548 

70 

.8726 

.1274 

.062507 

.004253 

69 

9779 

1472 

478 

61 

.8725 

.1275 

.078593 

.005347 

70 

11838 

1777 

417 

53 

.8724 

.1276 

.  104227 

.007103 

71 

14232 

2108 

364 

46 

.8722 

.1278 

.  130455 

.008905 

72 

16643 

2429 

318 

41 

.8719 

.1281 

.158867 

.010863 

73 

18843 

2710 

277 

36 

.8715 

.1285 

.  188929 

.012961 

74 

20623 

2926 

241 

31 

.8710 

.1290 

.219777 

.015153 

75 

21820 

3009 

210 

27 

.8703 

.1274 

.251756 

.017444 

76 

22414 

3028 

183 

24 

.8693 

.1265 

.291617 

.020373 

77 

22437 

3016 

159 

21 

.8678 

.1273 

.347336 

.024584 

78 

21924 

2978 

138 

19 

.8654 

.1299 

.444460 

.032070 

79 

20961 

2904 

119 

16 

.8615 

.1342 

.575914 

.042816 

SO 

19426 

2799 

103 

15 

.8555 

.1412 

.860776 

.066984 

81 

17410 

2659 

82 

14812 

2485 

83 

12327 

2280 

84 

10047 

2050 

85 

7997 

1800 

86 

6197 

1539 

87 

4658 

1277 

88 

3381 

1023 

89 

2358 

788 

90 

1570 

579 

91 

991 

404 

92 

587 

264 

93 

323 

161 

94 

162 

89 

95 

73 

44 

96 

29 

19 

97 

10 

7 

98 

3 

3 

TABLE  XXXIII. 
FRATERNAL  DEATH  AND  DISABILITY  EXPERIENCE  AND  FOUR  PER  CENT. 


Age. 

rx 

r*V) 

CL 

ML 

'C, 

5MX 

20 

.00012 

12 

384590.00 

886491.89 

5.2660 

3692.6142 

21 

.00013 

13 

192560.00 

501901.89 

5.4854 

3687.3482 

22 

.00015 

15 

105730.00 

309341.89 

6.0858 

3681.8628 

23 

.00018 

18 

62427.00 

203611.89 

7.0221 

3675.7770 

24 

.00021 

21 

39178.00 

141184.89 

7.8775 

3668.7549 

25 

.00025 

24 

25908.00 

102006.89 

8.6565 

3660.8774 

26 

.00029 

28 

17920.00 

76098.89 

9.7109 

3652.2209 

27 

.00032 

31 

12872.00 

58178.89 

10.3380 

3642.5100 

28 

.00034 

33 

9539.40 

45306.89 

10.5810 

3632.1720 

29 

.00035 

33 

7245.50 

35767.49 

10.1740 

3621.5910 

30 

.00037 

35 

5598.10 

28521.99 

10.3760 

3611.4170 

31 

.00038 

36 

4383.00 

22923.89 

10.2620 

3601.0410 

32 

.00039 

37 

3463.70 

18540.89 

10.1410 

3590.7790 

33 

.00041 

38 

2741.80 

15077.19 

10.0150 

3580.6380 

34 

.00044 

41 

2202.40 

12335.39 

10.3900 

3570.6230 

35 

.00048 

44 

1780.00 

10132.99 

10.7210 

3560.2330 

36 

.00052 

48 

1446.10 

8352.99 

11.2460 

3549.5120 

37 

.00056 

51 

1179.80 

6906.89 

11.4890 

3538.2660 

38 

.00061 

55 

967.21 

5727.09 

11.9140 

3526.7770 

39 

.00065 

58 

796.09 

4759.88 

12.0810 

3514.8630 

40 

.00069 

61 

657.31 

3963.79 

12.2170 

3502.7820 

41 

.00073 

64 

544.41 

3306.48 

12.3250 

3490.5650 

42 

.00077 

67 

452.00 

2762.07 

12.4060 

3478.2400 

43 

.00082 

71 

376.21 

2310.07 

12.6410 

3465.8340 

44 

.00086 

74 

313.81 

1933.86 

12.6090 

3453  .  1930 

45 

.00090 

77 

261.90 

1620.05 

12.6750 

3440.5240 

46 

.00094 

80 

219.06 

1358.15 

12.6630 

3427.8490 

47 

.00099 

83 

183.40 

1139.09 

1  2  .  6320 

3415.1860 

48 

.00105 

87 

153.66 

955.69 

12.7320 

3402.5540 

49 

.00113 

93 

129.03 

802.03 

13.0860 

3389.8220 

50 

.00124 

101 

108.24 

673.00 

13.6650 

3376.7360 

51 

.00139 

112 

90.94 

564.76 

14.5710 

3363.0710 

52 

.00157 

12,4 

76.31 

473.82 

15.5110 

3348.5000 

53 

.00179 

140 

64.23 

397.51 

16.8400 

3332.9890 

54 

.00210 

162 

53.90 

333.28 

18.7370 

3316.1490 

55 

.00255 

193 

45  .  15 

279.38 

21.4630 

3297.4120 

66 

.00321 

238 

38.07 

234.23 

25.4500 

3275.9490 

57 

.00407 

298 

31.87 

196.16 

30.6400 

3250.4990 

58 

.00504 

361 

26.79 

164.29 

35.6890 

3219.8590 

5'.) 

.00646 

452 

22.53 

137.50 

42.9670 

3184.1700 

60 

.00830 

566 

18.92 

114.97 

51.7360 

3141.2030 

61 

.01025 

680 

15.82 

96.05 

59.7640 

3089.4670 

62 

.01270 

815 

13.35 

80.23 

68.8750 

3029.7030 

63 

.01612 

999 

11.13 

66.88 

81.1780 

2960.8280 

64 

.02107 

1254 

9.38 

55.75 

97.9780 

2S79  .  6500 

65 

.02802 

1591 

7.89 

46.37 

119.5300 

27S  1.6720 

66 

.03765 

2023 

6.65 

38.48 

146.1400 

2662.1420 

67 

.05043 

2535 

5.56 

31.83 

176.0800 

2516.0020 

68 

.06676 

3097 

4.68 

26.27 

206.8400 

2339.9220 

69 

.08394 

3531 

3.92 

21.59 

226.7600 

2133.0820 

70 

.11133 

4171 

3.27 

17.67 

257.5600 

1906.3220 

71 

.  13936 

4519 

2.73 

14.40 

268.3100 

1648.7620 

72 

.16973 

4629 

2.34 

11.67 

264.2800 

1380.4520 

73 

.20189 

4490 

1.98 

9.33 

246.4800 

1116.1720 

74 

.23493 

4123 

1.64 

7.35 

217.6300 

869.6920 

75 

.26920 

3603 

1.37 

5.71 

182.8600 

052.0620 

76 

.31199 

3069 

1.17 

4.34 

149.7700 

469.2020 

77 

.37192 

2555 

.99 

3.17 

119.8900 

319.4320 

78 

.47653 

2144 

.86 

2.18 

96.7360 

199.5420 

79 

.61873 

1486 

.69 

1.32 

64.4690 

102.8060 

80 

.92776 

919 

.63 

.63 

38.3370 

38.3370 

TABLE  XXXIV. 
FRATERNAL  DEATH  AND  DISABILITY  EXPERIENCE  AND  FOUR  PER  CENT. 


Age. 

Daa 

Naa 

DL 

Dx 

Ni 

20 

45638.00 

915582.50 

1000000.000 

2950822  .  04 

21 

43660.00 

869944.50 

576930.000 

3.94 

1950822.04 

22 

41767.00 

826284.50 

362190.000 

6.16 

1373892.04 

23 

39953.00 

784517.50 

242530.000 

9.83 

1011702.04 

24 

38216.00 

744564.50 

170770.000 

13.56 

769172.04 

25 

36554.00 

706348.50 

125030.000 

15.76 

598402.04 

26 

34960.00 

669794.50 

94308.000 

20.36 

473372.04 

27 

33434.00 

634834.50 

72763.000 

24.09 

379064.04 

28 

31973.00 

601400.50 

57091.000 

27.16 

306301.04 

29 

30572.00 

569427.50 

45354.000 

31.61 

249210.04 

30 

29231.00 

538855.50 

36366.000 

34.61 

203856.04 

31 

27947.00 

509624.50 

29370.000 

36.77 

167490.04 

32 

26715.00 

481677.50 

23857.000 

40.54 

138120.04 

33 

25536.00 

454962.50 

19476.000 

42.47 

114263.04 

34 

24407.00 

429426.50 

15985.000 

43.25 

94787.04 

35 

23323.00 

405019.50 

13167.000 

45.71 

78802.04 

36 

22284.00 

381696.50 

10881.000 

47.75 

65635.04 

37 

21288.00 

359412.50 

9016.700 

49.41 

54754.04 

38 

20332.00 

338124.50 

7489.800 

51.60 

45737.34 

39 

19414.00 

317792.50 

6234.600 

54.34 

38247.54 

40 

18534.00 

298378.50 

5198.800 

56.01 

32012.94 

41 

17688.00 

279844.50 

4341.400 

58.83 

26814.14 

42 

16876.00 

262156.50 

3630.100 

61.16 

22472.74 

43 

16097.00 

245280.50 

3038.500 

62.26 

18842.64 

44 

15348.00 

229183.50 

2545.300 

63.69 

15804.14 

45 

14628.00 

213835.50 

2133.700 

65.27 

13258.84 

46 

13936.00 

199207.50 

1789.700 

66.88 

11125.14 

47 

13271.00 

185271.50 

1501.800 

68.26 

9335.44 

48 

12632.00 

172000.50 

1260.600 

69.11 

7833.64 

49 

12018.00 

159368.50 

1058.400 

69.19 

6573.04 

50 

11426.00 

147350.50 

888.750 

70.50 

5514.64 

51 

10856.00 

135924.50 

746.290 

71.82 

4625.89 

52 

10306.00 

125068.50 

626.670 

73.90 

3879.60 

53 

9775.10 

114762.50 

526.210 

76.85 

3252.93 

54 

9262.50 

104987.40 

441.810 

80.26 

2726.72 

55 

8766.80 

95724.90 

370.950 

84.78 

2284.91 

56 

8285.90 

86958.10 

311.450 

91.56 

1913.96 

57 

7818.80 

78672.20 

261.470 

100.65 

1602.51 

58 

7363.80 

70853.40 

219.510 

113.08 

1341.04 

59 

6920.50 

63489.60 

184.260 

128.62 

1121.53 

60 

6487.20 

56569  .  10 

154.670 

148.11 

937.27 

61 

6062.20 

50081.90 

129.830 

172.76 

782.60 

62 

5646.40 

44019.70 

108.980 

201.01 

652.77 

63 

5239.00 

38373.30 

91.470 

233.25 

543.79 

64 

4837.30 

33134.30 

76.773 

271.72 

452.32 

65 

4437.50 

28297.00 

64.429 

319.92 

375.55 

66 

4036.70 

23S59.50 

54.070 

380.43 

311.12 

67 

3631.90 

19822.80 

45.373 

455.98 

257.05 

68 

3222.00 

16190.90 

38.074 

547.65 

211.68 

69 

2809.20 

12968.90 

31  .946 

653  .  17 

173.61 

70 

2405.90 

10159.70 

26.802 

760.24 

141.66 

71 

2002.20 

7753.80 

22.482 

878.84 

114.86 

72 

1619.20 

5751.60 

18.855 

988.11 

92.38 

73 

1269.60 

4132.40 

15.808 

1075.75 

73.52 

74 

963.34 

2862.80 

13.246 

1132.11 

57.71 

75 

706.40 

IS!  (9.46 

11.094 

1151.74 

44.46 

76 

499.16 

1193.06 

9.284 

1137.60 

33.37 

77 

335.31 

693.90 

7.760 

1094MO 

24.09 

78 

207.22 

358.59 

6.475 

1028.80 

16.33 

79 

108.38 

151.37 

5.388 

945.76 

9.85 

80 

42.99 

42.99 

4.463 

842.77 

4.46 

INDEX 

Actuarial  Principles,  Application  of 147 

Adequate  Rates 253 

Adverse  Selection 247 

Age  and  Cost 160 

Algebraic  Notation _ 193-217 

Annuities 193 

Disability 214 

Premiums 193 

American  Notation 205 

Amortization  of  Bonds 250 

Annual  Reports 276  -284 

Annuity,  Kinds  of 250 

Assessments-as-needed  Insurance 156 

Assessment  Associations 91  -96 

Assets 246 

Associated  Fraternities  of  America ___  62-66 

Benefit  Side  to  Insurance  Contract 162 

Benefits,  Varying 193,201 

British  Notation 205 

Calculations  by  Commutation  Columns 197 

Certificate,  Kinds  of 219 

Child  Insurance 97 

Commutation  Columns,  How  to  Use 216 

Commutation  Tables,  Explanation  of 150 

Constitutions,  Difficulty  of  Interpreting 303 

Contracts,  Variety  of 106 

Contribution  and  Cost 159 

Contribution  Side  to  Insurance  Contract 162 

Contributions,  Varying 196-202 

Cooperation 104,164 

Death  Rate 157 

Definitions 217-275 

Actual  Mortality 247 

Adequate  Rates 253 

Adverse  Selection 247 

Amortization  of  Bonds 250 

Annuitant 250 

Annuity,  Kinds  of 250 

Assets 246 

Certificate  and  Policy,  Kinds  of . 219 

Comparison  of  Reserves 267 

Concomitants  of  Change 269 

Cost  of  Insurance 232 

Development  of  u  and  k 234 

Disability,  Permanent  and  Total... 274 

Discount  and  Present  Value 247 

Division  of  Premium  Into  "Expense,"  "Mortality"  and  "Reserve"  Elements 236 


357 

Equity  of  Surrender  Values 235 

Expected  Mortality 247 

Expiry__                                                             239 

Group  Insurance 248 

Health  and  Accident  Insurance 273 

Incontestable 239 

Indemnity  Against  Loss 219 

Individual  Reserve 234 

Lapses 239 

Legal  Reserve 251 

Liabilities 247 

Life  Expectancy 23 1 

Loading 224 

Loans 238 

Maturity 239 

Methods  of  Insurance 258 

Mortality  Rates 251 

Mortality  Tables  (See  Contents) 220 

Mutual,  Mixed  and  Stock  Companies 247 

Natural  Premiums 224 , 259 

Natural  Premium  Plan  of  Insurance 295 

Net  Premiums 222 

Net  Value 237 

Non-Forfeitable 239 

Pensions 252 

Policy  and  Certificate,  Kinds  of 219 

Present  Value  and  Discount 247 

Prospective  Valuation 243 

Readjustments 274 

Renewal  Premium 247 

Reserve 224 

Reserve,  Initial,  Mean  and  Terminal 245 

Reserve  Values 245 

Retrospective  Valuation 244 

Stock,  Mixed  and  Mutual  Companies 247 

Surplus 246 

Surrender  Value 237 

Valuation 240 

Solvency,  A  Test  for  When 240 

Solvency,  Not  a  Test  for  Fraternal  Society 241 

Diagrams 148-9,223,228,230,266,268,278 

Disability,  Permanent  and  Total 274 

Disability  Symbols 214 

Distribution  of  Cost . 158 

Equivalent  Promises 155 

Exhibits 1—167, 11—171,  III— 180,  IV— 181,  V— 182,  VI -183 

Expenses 119 

Expiry 239 

Expulsion  of  Members 301 

Flexible  Premium  System 93 

Fraternal  and  Life  Company  Contract  Compared 154 


358 

Fraternal  Beneficiary  Societies ^9-79    104-111 

Associated  Fraternities  of  America (;•> 

General  Review  of ]Q4 

History  of < j 

National  Fraternal  Congress  and  Legislation 16-60 

Statistics  of 75 

Fraternal  Experience  Tables 122 

Fraternity,  Strength  of 253 

Formulas  to  Memorize 204 

Friendly  Societies 1_9 

History  of 2 

Legislation  Concerning 3 

Origin  of 1 

Report  of  Royal  Commission 7 

Group  Insurance 2 -IX 

Health  and  Accident  Insurance 273 

Incontestable 239 

Increasing  Cost  of  Insurance 161 

Indemnity  Against  Loss_ , 219 

Industrial  Companie  ,  History  of 96 

Insurance  Contract 152-161 

Age  and  Cost 160 

Assessment- as-needed 156 

Benefit  Side  and  Contribution  Side 162 

Contribution  and  Cost 1 59 

Death  Rate 157 

Distribution  of  Cost 1 5s 

Equivalent  Promises 155 

Fraternal  and  Life  Company  Compared 15  I 

Inception  of 19-} 

Increasing  Cost  of  Protection „ 161 

Law  of  Mortality 157 

Life  Expectancy - 101 

Method  of  Computing  Rates ^  _  _  _ 156 , 1 C4 

Natural  Premiums 101 

Possibility  of  Performance . 161 

Insurance  Cost -. 232  -237 

Interest  Earnings 303 

Lapse  Factor 177 -HH) 

Feasibility  of 184-190 

Premium  Computation  Including 177 

Lapses 177-190,239 

Law  of  Mortality 157 

Legal  Reserve 25 1 

Level  Annual  Premium 54,61,125,172-5,179 

Computation  of 175 

Legislation 3,16-74,90,297-300 

Liabilities 247 

Life  Expectancy 161,231 

Life  Insurance  Companies SO  -91 

Fraternal  Societies  and  Life  Companies 80 

History  of  __  81 


359 

Legislative  Investigation 90 

Statistics  of 90 

Loading , 224 

Loans 238 

Maternity  Benefits 300 

Maturity 239 

Methods  of  Insurance 258 

Mobile  Bill 66-74,297-300 

Monthly  Contributions ..208-209 

Commutation  Columns 208 

Formula 209 

Mortality,  Actual  and  Expected 247 

Mortality  Rates  (See  Insurance  Contract) 251 

Mortality  Tables  (See  Tables  in  Contents 122,220 

A  Fiction __209-210 

Diagrams 148 

Normal,  Sub-Normal  and  Super-Normal...  _ _223  -226 

Mutual,  Mixed  and  Stock  Companies 247 

National  Fraternal  Congress 16-60 

Legislation  and  Proceedings  of 16-60 

Report  on  Table  of  Mortality 52 

Natural  Premiums 161,224,259 

Natural  Premium  Plan  of  Insurance 259 

Net  Contributions  to  be  Valued 303 

Net  Premiums 222 

Net  Value 237 

New  York  Conference  Bill 66-74,297-300 

Non-Forfeitable 239 

Observations  on  Present  Industrial  Regime 110 

Open  Assessment  Associations 91-96 

Flexible  Premium  System 93 

History  of 91 

Statistics  of 95 

Operation  Along  Social  and  Fraternal  Lines 108 

fusions . 252 

}olicy,  Kinds  of 219 

'ossibility  of  Performing  Insurance  Contract 163 

Vliminary  Term  Insurance 303 

'remiums,  Level  and  Increasing _._, 172-174,265-267 

'rcmiums,  Single  and  Annual _' 164-172,207-212 

Vemiums,  Renewal 247 

'resent  Value 247 

'resent  Value  of  Benefits 164 

'resent  Value  of  Contributions 169 

Rates,  Method  of  Computing 156, 164 

Readjustments . 111,274 

Relations  Between  D  &  C,  N  &  M,  and  S  &  R 205 

Reports  to  Insurance  Commissioners 276  -284 

Reserve 224  -245 

Formulas  for  Computing 215 

Individual 234 

Initial,  Mean  and  Terminal..  245 


360 


Legal  _. 

Methods  of  Determining  Illustrated 

Values 

Risk,  Accident,  Death  and  Sickness 

Statistics  and  Explanations  for  Valuation. 

Stock,  Mixed  and  Mutual  Companies 

Surplus 

Surrender  Value 

Equity  of 

Similar  Symbols 

Symbols  for  Disability 

Symbols  for  Premiums  and  Annuities 

Tables  (See  Contents). 

Valuation 

Prospective 

Retrospective 

Test  for  Solvency  When 

Valuation  Statistics  and  Explanations 

Wives  of  Members,  Benefits  to 


CONTENTS. 

Pages 

FRIENDLY  SOCIETIES 1-9 

Origin,  1-2.     History,  2-3.     Legislation,  3-7.     Report  Royal  Commission,  7-9. 

FRATERNAL  BENEFICIARY  SOCIETIES 9-79, 104-111 

Inequity  of  Original  Plans,  12-16.  History,  9-16.  Legislation  and  Proceedings 
National  Fraternal  Congress,  16-60.  Major  N.  S.  Boynton,  50-53.  Report  on 
National  Fraternal  Congress  Mortality  Table,  53-58.  Dr.  Oronhyatekha,  60r-61 . 
Associated  Fraternities  of  America,  62-66,  74-75.  Statistics,  75-79.  General 
Review,  104-111. 

NEW  YORK  CONFERENCE  BILL  (being  the  Mobile  Bill  Amended) 66-74 

LIFE  INSURANCE  COMPANIES 80-91 

Fraternal  Societies  and  Life  Companies,  80-81.  History,  81L-89.  Statistics,  90. 
Legislative  Investigation,  90-91. 

OPEN  ASSESSMENT  ASSOCIATIONS 91-96 

History,  91-93.     Flexible  Premium  System,  93-95.     Statistics,  95-96. 

INDUSTRIAL  COMPANIES 96-97 

History,  96-97. 

CHILD  INSURANCE 97-1 04 

GENERAL  REVIEW 104-111 

Cooperation,  104,  164.  Father  Upchurch,  105.  Variety  of  Contracts,  106,  107. 
Capacity  of  the  Common  People,  106.  Ingenuity  of  Ignorance,  107.  Actuarial 
Predictions  not  Verified,  108.  Operation,  along  Social  and  Fraternal  Lines,  109. 
In  Harmony  with  Conditions,  110.  The  Present  Industrial  Regime  and  Observa- 
tions, 110-111. 

READJUSTMENTS 111-119 

EXPENSES 119-121 

FRATERNAL  EXPERIENCE  TABLES 122-146 

APPLICATION  OF  ACTUARIAL  PRINCIPLES 147 

MORTALITY  TABLES 122-146, 14§-150 

Diagrams,  148,  149. 

EXPLANATION  OF  COMMUTATION  COLUMNS 150-153 

THE  INSURANCE  CONTRACT 1 53-164 

Fraternal  and  Life  Company  Compared,  154-5.  Equivalent  Promises,  155-6. 
Assessments-as-Needed,  156.  Method  of  Computing  Rates,  156, 164-177.  Law 
of  Mortality,  157.  Death  Rate,  157-158.  Distribution  of  Cost,  158-159.  Con- 
tribution and  Cost,  159-160.  Age  and  Cost,  160-161.  Natural  Premiums,  161. 
Increasing  Cost  of  Protection,  161.  Life  Expectancy,  161-162.  Benefit  Side 
and  Contribution  Side,  162-3.  Possibility  of  Performance,  163.  The  Insurance 
Problem,  163-4.  Cooperation,  164,  104. 

PRESENT  VALUE  OF  BENEFITS 164-169 

PRESENT  VALUE  OF  CONTRIBUTIONS 169-172 

LEVEL  ANNUAL  PREMIUM 172-174 

GENERAL  STATEMENT 175 

ANOTHER  METHOD  OF  COMPUTATION 175-177 

COMPUTATION  INCLUDING  LAPSE  FACTOR 177-183 

FEASIBILITY  OF  LAPSE  FACTOR.  _  __  184-192 


Pages 

THE  INSURANCE  LIABILITY 192-203 

Death,  Accident  and  Sickness  Risk,  192-3.  Symbols  for  Premiums  and  Annui- 
ties, 193.  Inception  of  the  Contract,  194.  Varying  Benefits,  193-5,  201-3. 
Varying  Contributions,  ,196-7,  202-3. 

SHORT  CUTS  IN  CALCULATIONS 197-206 

Commutation  Columns,  197-206.  Cx,  197-199.  Mx,  198.  Dx,  199.  Nx,  199- 
200.  Px  =  Mx-rNx,  200.  Benefit  Side  and  Payment  Side,  200-2.  20- Year  ' 
Term,  200.  Pure  Endowment,  200-1.  Endowment  Insurance,  201.  Increas- 
ing or  Cumulative  Insurance,  202.  Varying  Benefits,  193-5,  202-3.  Varying 
Contributions,  196-7,  202-3.  R.  and  S.  Columns,  203.  Formulas  to  Memorize, 
204.  Relations  Between  D  and  C,  N  and  M,  and  S  and  R,  205.  American  and 
British  Notation,  205-6. 

PRACTICAL  APPLICATION  OF  FORMULAS 206-217 

Principle  of  Computations  the  same  for  Societies  and  Companies,  206.  Assump- 
tions Different,  206.  Single  and  Annual  Premiums  for  Whole  Life,  Term  and 
Limited  Payment  Insurance  and  for  Whole  Life,  Deferred  and  Temporary  An- 
nuities, 207-209.  Commutation  Columns  for  Monthly  Contribution  Rates, 
208-9.  An  Original  but  Uselessly  Intricate  Formula  for  Nx2  and  M*2,  209-21 1. 
Annual  and  Single  Premiums  for  Limited  Payment  and  Endowment  Insurances 
and  Various  Modifications  of  Insurances  and  Annuities,  211-212.  A  Novel 
Plan,  212-213.  Similar  Symbols,  213. 

DISABILITY  SYMBOLS 214-215 

FORMULAS  FOR  COMPUTING  RESERVES 215-216 

Three  Methods  Illustrated,  216. 

USE  OF  COMMUTATION  COLUMNS 216-217 

Illustrated  by  Examples,  216-217. 

AN  ENGLISHMAN'S  CONCLUSION 217-219 

Teach  Insurance  in  Public  Schools.     Lack  of  Information  Amongst  Teachers. 

D  EFINITIONS --21 7-275 

Indemnity  Against  Loss,  219.  Policy  and  Certificate,  219-220.  Whole  Life, 
Limited  Payment,  Endowment,  Term,  Renewable  Term,  Convertible  Term, 
Instalment  Policies  or  Certificates,  220.  Mortality  Tables,  220-222.  Net  Pre- 
miums, 222-224.  Loading,  224.  The  Natural  Premium,  224,  259.  The  Re- 
serve, 224-231.  Life  Expectancy,  231-232.  Insurance  Cost,  232-237.  Devel- 
opment of  u  and  k,  234.  Individual  Reserve,  234-236.  Equity  of  Surrender 
Values,  235-236.  Division  of  Premium  into  "Expense,"  "Mortality"  and  "Re- 
serve" Elements,  236.  Reserve  a  Fiction,  236-237.  The  Net  Value,  237. 
Surrender  Value,  237-8.  Loans,  238-9.  Non-Forfeitable,  239.  Incontestable, 
239.  Lapses,  239.  Expiry,  239.  Maturity,  239-240.  Valuation,  240-245. 
Difference  for  Life  Companies  and  Fraternal  Societies,  240-1.  When  a  Test  of 
Solvency,  241-2.  Can  not  be  Made  Test  of  Solvency  for  Fraternal  Society, 
241-3.  Prospective  Valuation,  243-4.  When  an  Absurdity,  244.  Results  of, 
244.  Retrospective  Valuation,  244-5.  Reserve  Values,  245-6.  "Initial," 
"Mean"  and  "Terminal"  Reserves,  245-6.  Surplus,  246.  Assets,  246-7.  Lia- 
bilities, 247.  Stock,  Mixed  and  Mutual  Life  Companies,  247.  Renewal  Pre- 
mium, 247.  Present  Value,  247.  Actual  Mortality,  247.  Expected  Mortality, 
247.  Adverse  Selection,  247.  Group  Insurance,  248-9-250.  Annuity,  Annui- 
tant, Life  Annuity,  Perpetual  Annuity,  Temporary  Annuity,  Contingent  Annui- 
ty, Deferred  Annuity,  Joint  Annuity,  Survivorship  Annuity,  250.  Amortiza- 
tion of  Bonds,  250-1 .  Legal  Reserve,  251.  Mortality  Rates,  251-2.  Pensions, 
252-3.  Strength  of  Fraternity,  253.  Adequate  Rates,  253-4.  Competing  for 
Adequacy,  254-5.  Adequacy,  Permanency,  Attractiveness,  255-6-7.  Legisla- 
tion, 257-8.  Insurance  Methods,  258-9.  The  Natural  Premium  Plan,  259-265. 
Level  Premium  Plan,  265-7.  Comparison  of  Reserves,  267-8-9.  The  Last  Man, 
269.  Concomitants  of  Change,  269-270.  Misleading  Statements,  270-1 .  Crit- 
icism, 271-2.  The  Home  of  Brotherhood,  272-3.  Health  and  Accident  Insur- 
ance, 273-4.  Permanent  Total  Disability,  274.  Readjustments,  274-5. 


363 

Pages 

VALUATION  STATISTICS  AND  EXPLANATIONS 276-300 

Compilation  of  Statistics,  276-283.  Three  Methods  of  Valuation  Allowed  by 
State  Laws,  276-7.  Form  of  Sheet  for  Protection,  276.  Valuation  Factors,  277. 
The  nUx  and  nKx  Factors  for  Valuation  under  "Section  23b,"  277.  How  to  tran- 
scribe Data  with  Forms  of  Sheets,  277,  8,  9,  280.  How  to  Prepare  Schedule  VI 
of  the  Annual  Report,  280-1.  Additional  Forms  281-2.  Suitable  for  Tabulat- 
ing Deaths  and  Lapses,  282.  Investigation  of  Mortality  Experience,  282,  3. 
Examples  of  Valuations  by  the  "Net  Reserve,"  "Tabular"  and  "Accumulation" 
Methods,  283-296.  "Net  Reserve"  Method,  283-4.  "Tabular"  Method,  284-5. 
Prospective  Valuations,  285-6.  Retrospective  Valuations,  286-7.  Identical 
Valuation  Results  under  the  three  Methods  with  the  same  Tabular  Contribution 
Rates,  otherwise  Different  Results,  286.  Valuation  Results  differ  from  Actual 
Results  in  Practical  Operation,  287-8.  Valuation  on  the  "Accumulation  Basis" 
Advocated  by  Commissioner  Ekern  and  Actuary  Anderson  compared  with  the 
Treatment  in  this  Book,  288-9.  Retrospective  Valuation  compared  with  the 
Prospective  Method,  289-296.  Retrospective  Valuation  necessary  for  Appor- 
tionment of  Funds,  289.  "Net  Reserve"  Method  applicable  to  Few  Fraternal 
Societies,  289.  Its  Meaning,  290.  "Tabular"  Method  has  many  advantages, 
290.  "Accumulation"  Method  is  Best  Suited  for  the  Majority  of  Societies  and 
Especially  Valuable  in  Connection  with  the  "Tabular,"  290-6.  Examples  of 
Prospective  and  Retrospective  Valuations,  292-3-4.  Section  23b,  297-300. 

MATERNITY  BENEFITS 300- 1 

BENEFITS  TO  MEMBERS'  WIVES 301-2 

GENERAL  COMMENTS 302-3 

Right  to  expel  members  not  considered  in  Valuations,  301.  Difficulty  to  Inter- 
pret Constitutions,  303.  Interest  Earning  Secondary,  303.  "Net"  Contribu- 
tions to  be  Valued,  303.  Preliminary  Term  and  Other  Methods  to  Provide 
Expense,  303. 

TABLES 

CONTRIBUTION  RATES  FOR  CHILD  INSURANCE 101-102 

SOCIETIES  ADMITTING  MEN  ONLY 122 

SOCIETIES  ADMITTING  WOMEN  ONLY 123 

SOCIETIES  ADMITTING  MEN  AND  WOMEN 123 

43  SOCIETIES  COMBINED 123 

CONTRIBUTION  RATES  FOR  43  SOCIETIES 125 

MORTALITY  TABLES  OF  43  SOCIETIES 128-133 

Attained  Ages,  Existing,  Lapses,  Deaths,  Exposures,  Unadjusted  and  Adjusted 
Death  Ratios,  128-9.  Unadjusted  and  adjusted  lx  (living)  dx  (dying)  px  prob- 
ability of  living,  qx  (probability  of  dying)  130-1.  Test  of  Graduation,  132-3. 

MORTALITY  TABLES  FOR  MEN  ONLY 134-137 

Attained  Ages,  Exposures,  Unadjusted  and  Adjusted  Death  Ratios,  lx  (living)  dx 

(dying),  134-5.     Test  of  Graduation,  136-7. 
MORTALITY  TABLES  FOR  WOMEN  ONLY • 138-140 

Attained  Ages,  Exposures,  Unadjusted  and  Adjusted  Death  Ratios,  lx  (living) 

dx  (dying),  138-9.     Test  of  Graduation,  140. 

MORTALITY  TABLES  FOR  MEN  AND  WOMEN 141-144 

Attained  Ages,  Exposures,  Unadjusted  and  Adjusted  Death  Ratios,  lx  (living), 
dx  (dying)  141-2.  Test  of  Graduation,  143-4. 

COMPARATTV  V    I  )  E ATII    RATIOS 1 45~1 46 

Males.  New  English  Experience,  Scandinavian  Experience,  Australian  Expe- 
rience, Canada  Life,  National  Fraternal  Congress,  American  Experience,  Forty- 
three  Societies.  Females.  Farr's,  Scandinavian. 


364 

Pages 

COMPUTATION  OF  PREMIUMS 164-183 

Exhibit  1.  Insurance  Years,  Instalments  of  Claims,  Present  Value  of  $1.00, 
Present  Value  of  Claims  (or  Benefits),  167.  Exhibit  II.  Beginning  of  Years, 
Instalments  of  Contributions,  Present  Value  of  Contributions,  171.  Test  of  Com- 
puted Premiums,  176-7.  Level  Premiums  with  and  without  Lapse  Factor,  179. 
Computations  with  Lapse  Factor,  179.  Computations  with  Lapse  Factor — 
Exhibit  III — Insurance  years,  Insurance  at  Beginning  of  Years,  Probability  of 
Dying,  Instalment  of  Claims,  Lapse  Ratios,  Terminations  by  Lapse,  180. 
Exhibit  IV — Present  Value  of  Claims,  181.  Exhibit  V — Insurance,  Probability 
of  Living,  Protection  at  Beginning  of  Years,  Instalments  of  Contributions,  182. 
Exhibit  VI — Present  Value  of  Contributions,  183. 

COMPUTATION  OF  RESERVES.... .216 

ILLUSTRATING  LEVEL  AND  INCREASING  PREMIUMS 261-262 

"NET  RESERVE"  VALUATION 283 

"TABULAR"  VALUATION 284-285 

"ACCUMULATION"  VALUATION 287 

PROSPECTIVE  AND  RETROSPECTIVE  VALUATION 293-294 

FORM  FOR  CREDIT  EXHIBIT 297 

APPENDIX . 304-355 

TABLE  I.    (N.  F.  C.) 304-305 

Age  (x)  Number  Living  (lx),  Number  dying  (dx),  Probability  of  Dying  (qx). 
Death  Rate  per  1000,  Discounted  Death-Rate  (qxvx),  Life  Expectancy  (ex) 
Average  Duration  of  Life. 

TABLE  II.  (N.  F.  C.  COM.  COLS.  &  4%) 306-307 

Age  (x)  Present  value  of  One  due  n  Years  Hence  (vx),  Dx,  Nx,  S,,  Cx,  Mx,  Rx. 

TABLE  III.    (N.  F.  C.  DERIVED  VALUES,  4%) 308-309 

Life  Annuity  (ax).  Whole  Life,  Single  Premium  (Ax).  Whole  Life  Annual 
Premium  (Px)  Term  to  Age  70,  Annual  Premium  ( 1 7o_xPx)  Annuity  of  $100 
Beginning  at  age  70.  Annual  premium  Temporary  Annuity  to  Age  70. 

TABLE  IV.     (N.  F.  C.  AND  4%  ANNUAL  PREMIUMS) 310 

Twenty  Payment  Life  (^Px)  Ten  Payment  Life  (i0Px)  Twenty  Year  Term 
(UPx)  Ten  Year  Term  (|i0Px)  Five  Year  Term  (|5PX). 

TABLE  V.     (N.  F.  C.  &  4%  MONTHLY  BASIS) 311 

•VrI2      ,  XT  I  2       TV/rI2       ,  T»T12 

Nx  ,  log.  Nx  ,  Mx  ,  log.  Mx  . 

TABLE  Va.    (N.  F.  C.  &  4%  MOMENTLY  BASIS) 312 

Life  Annuity  (ax),  Whole  Life  Annual  Premium  (Ax),  Whole  Life  Annual 
Premium  (Px). 

TABLE  VI.     (N.  F.  C.  AND  3£%  COM.  COLS.) 313-314 

Dx,  Nx,  Sx,  Cx,  Mx,  Rx. 

TABLE  VII.  (N.  F.  C.  &  3%  COM.  COLS.) 315-316 

Dx,  NX,  Sx,  Cx,  Mx,  Rx. 

TABLE  VIII.     (N.  F.  C.  &  3|%  AND  3%)  317 

Life  Annuity  (ax)  Whole  Life  Single  Premiums,  (Ax)  Whole  Life  Annual  Premium 
(Px). 

TABLE  IX.  (N.  F.  C.  &  3%,  3|%  AND  4%  MONTHLY  PREMIUM  RATES) 318 

TABLE  X.     (N.  F.  C.  AND  3%,  3£%,  AND  4%)  319 

Valuation  Columns,  u  and  k. 


365 

Pages 

TABLE  XI.     (MAKEHEMIZED  N.  F.  C.) 320-321 

Number  living  (lx)  number  dying  (dx)  Probability  of  Living  (px)  Probability  of 
dying  (qx)  Force  of  Mortality  (A**). 

TABLE  XII.     (MAKEHAMIZED  N.  F.  C.  &  4%)  Dx,  Nx 322 

TABLE  XIII.     (MAKEHAMIZED  N.  F.  C.  &  4%) 323 

Life  Annuity  (ax)  Sing.  Prem.  (Ax)  An.  Prem.  (Px). 
TABLE  XIV.     (MAKEHAMIZED  N.  F.  C.  &  4%,  Two  LIVES) 324 

Living  (Ixx),  Dying  (d«),  log.  1^,  log.  d«.     Uniform  Seniority. 
TABLE  XV.    COM.  COLS.  FOR  Two  LIVES,  4% 326-327 

D«,  N«,  Cxr,  M«. 
TABLE  XVI.     DERIVED  VALUES  Two  LIVES,  4% 328 

Life  Annuity  (EXX)  Sing.  Prem.  (Axx),  Aiv  Prem.  (P**)- 

TABLE  XVII.     N.  F.  C.  WHOLE  LIFE  TERMINAL  RESERVES,  4% 329-333 

TABLE  XVIII.    AMERICAN  EXPERIENCE  TABLE  OF  MORTALITY 334 

Living  (lx),  Dying  (dx),  Prob.  Dying  (qx)  Life  Expectancy  (ex). 

TABLE  XIX.     COM.  COLS.  AT  4%,  Dx,  Nx,  Mx,  RX 335-336 

TABLE  XX.    AM.  EXPERIENCE  TABLE  4%  VALUES 337-338 

Life  Annuity  (ax),  W.  L.  Sing.  Prem.  (Ax),  W.  L.  Annual  Prem.  (Px),  Valuation 

Cols,  u  and  k. 

TABLE  XXI.    INTEREST  TABLES,  THREE  PER  CENT 339 

Amt.  of  1.00  at  End  of  n  Years  (l+i)n.  Present  Value  of  1.00  Due  n  Years 
Hence  (vn).  Amt.  of  1.00  Per  Annum  at  End  of  n  Years  (S^"| ).  Present  Value  of 
1.00  Per  Annum  for  n  Years  (aJTj  )• 

TABLE  XXII.    INTEREST  TABLES,  3|%,  (SAME  AS  XXI)  340 

TABLE  XXIII.    INTEREST  TABLES,  4%,  (SAME  AS  XXI) 341 

TABLE  XXIV— DEATH  AND  DISABILITY  (1902  FUNCTIONS) 342 

N.^F.  C.  Prob.  of  Dying  (qx),Prob.  of  Disability (ix)  Prob.  of  Death  or  Disability 

(qx  =  qx+ix). 
TABLE  XXV.    COMBINED  DEATH  AND  DISABILITY 343 

Actives  (alx),  Number  Dying  and  Disabled  at  Age  (x)  out  of  alx  persons  (d'x=  alx  — 

alx+1),  Number  Disabled  (ilx=alxXix). 

TABLE  XXVI.     DEATH  AND  DISABILITY  COM.  COLS.,  4% 144 

aDx  =  vx*lx,  *NX=Z*DX. 

Cx  =  vx+1d'x,  MX=2CX. 
TABLE  XXVII.  COM.  COLS.  4%  MONTHLY 345 

aDx2,aNx2,  C'x12,  Mx12. 
TABLE  XXVIII.  DISABILITY  ONLY  COM.  COLS.,  4% 346 

'CK-V'^lx,   SMX  =  S'CX. 

TABLE  XXIX.    LOGARITHMS  OF  COM.  COLS 347 

TABLE  XXX.     DERIVED  VALUES,  4%,  MONTHLY 348-349 

a    12    a  .  12    3^12         ,   ,  .  , 

ax  ,    Ax  ,    Px    and  logarithms. 

TABLE  XXXI.    DEATH  AND  DISABILITY  (1910  FUNCTIONS) 350-351 

N.  F.  C.  lx,  dx,  px  and  qx. 

Death  and  Disability  if,  daa,  paa,  qf . 

TABLE  XXXII.     i",  djj,  lx,  dx,  px,  qx,  pai,  qai 352-352 

TABLE  XXXIII.     rx,  ix  =  rxlaa,  Cx,  Mx,  JCX,  JMX ...  — -        354 

TABLE  XXXIV.     Daa,  Naa,  Dx,  Dx,  Nx,  Nx 355 


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